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BTL products halve in number as rates rise

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  • 14/04/2020
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BTL products halve in number as rates rise
The number of buy-to-let (BTL) products on the market since the start of the coronavirus crisis has almost halved while rates have increased.

 

According to Moneyfacts data, there are now just 1,593 mortgages for landlords today, down from 2,897 at the start of March – a fall of 45 per cent in just over a month.

Deals at the highest loan to values (LTVs) have been the biggest sacrifices – with almost 90 per cent of these products being removed from the market.

There are now less than 40 deals combined at 80 per cent LTV fixed for either two- or five-years, down from 291 in March.

Deals at 60 per cent LTV have fared better, with an increase of five and six respectively within the two fixed rate brackets.

And overall the volume of products cut has been shared equally between two- and five-year fixes, with just 55 per cent of deals remaining in each market.

 

Rate rollercoaster

However, rates have increased notably along the way – although perhaps surprisingly it is to 60 per cent LTV deals which have seen the sharpest increases.

Rates at 60 per cent LTV have risen by 0.35 per cent and 0.31 per cent respectively since last month, in contrast the 80 per cent LTV deals were 0.2 per cent and 0.21 per cent more expensive.

The overall average rate has fallen at both two-year and five-year fixed levels – largely driven by the mass removal of deals at higher LTVs which have corresponding higher interest rates.

But some product LTVs have seen rates cut slightly, albeit also with a significant removal of product choice.

Two-year fixes at up to 70 per cent LTV have dropped on average 0.12 per cent, while five-year fixes at 75 and 65 per cent LTV have fallen by 0.07 and 0.19 per cent respectively.

 

Worst possible timing

Moneyfacts spokeswoman Rachel Springall said it was clear to see how the virus pandemic and isolation rules had led to a huge shake-up in the choice and cost of buy-to-let mortgages.

“This couldn’t come at a worse time, as from this new tax year, mortgage interest tax relief has been completely phased out for buy-to-let landlords – which allowed them to deduct mortgage expenses from rental income to reduce a tax bill,” she said.

“The fall in choice and rise in interest rates will be a blow to landlords who are considering investing, however the market has moved in this way to protect providers’ existing books.

“Even if some believe the property market to be ripe to invest in, prospective borrowers who don’t have a decent deposit could well be discouraged.”

Springall noted that existing customers could be looking to cut down their monthly loan payments or concerned about rental payments.

“Thankfully, lenders will allow borrowers to defer their mortgage repayments for three months as of last month, but landlords must act now and check online to see how tenants falling onto universal credit or local housing allowance could impact their rental cover ratio.

“As interest rates rise, landlords would be wise to move quickly to remortgage,” she added.

 

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