The buy-to-let mortgage market, unsurprisingly, has experienced significant turbulence since the beginning of the coronavirus lockdown which has meant that the profile of lenders and products available to landlords has changed.
To begin with some lenders have withdrawn from the market, a number of these (typically non-banks) should be temporary as they wait for funding lines to become available, but there may also be long term casualties who are unable to return to buy-to-let lending post-crisis.
The overall number of buy-to-let mortgage products has dropped markedly, with Moneyfacts reporting that 1304 products had been taken off during March with changes continuing throughout April and into May. It was reported that 5-year fixed rates took the biggest hit, followed by 2-year fixed rates.
Some lenders have also responded to the crisis by reducing their maximum loan-to-values, resulting in a significant dent to the 80 per cent LTV market and the removal of 85 per cent options. This may cause challenges for buy-to-let clients with more highly leveraged properties when they are looking to remortgage and deter those without high deposits from making purchases.
We have also seen lenders modifying their lending criteria, especially in the complex buy-to-let sector, which may allow the remaining specialist lenders offering, for example, finance for HMOs, limited companies and multi-unit blocks, to take a large slice of the pie.
Interest rates have increased on several ranges which will be disappointing to landlords, especially as the mortgage interest tax relief scheme for buy-to-let properties was finally phased out in April, creating additional costs to many rental property businesses. However, there are still competitive rates to be found.
The fact that the country is in lockdown has meant that visual property inspections are no longer possible and for this reason some lenders have suspended offering new purchase finance. However, there are a growing number of providers who have switched to using desktop valuations or AVMs during this unprecedented time, to allow business to continue.
The government has advised against house moves during the crisis period which has slowed the housing market and impacted on buy-to-let purchase transactions. However, it does mean that there is likely to be a pent-up demand for buy-to-let finance once lockdown measures are lifted and movement in the market is resumed.
This is obviously a challenging time for everyone in the buy-to-let sector, but also a time when landlord clients can benefit from the support of a buy-to-let mortgage expert. Being able to answer questions about the availability of finance or other relevant issues, such as buy-to-let mortgage holidays(available for both personal name and limited company mortgages), may be invaluable to landlords during these unprecedented times.
Many landlords could save themselves money by remortgaging, so it is also worth reviewing the whole property portfolio during this period. There may be options to release some equity which could help ease the pressure on buy-to-let businesses in the current circumstances.
At our business, we are paying particular attention to remortgage business as many of our clients have mortgages coming to the end of their initial rates during the next couple of months. There are still plenty of options to choose from and solutions to be found for most scenarios, which is where having buy-to-let expertise comes to the fore.