Moneyfacts UK Mortgage Trends Treasury Report data reveals that the Covid-19 pandemic has impacted the choice and cost of deals in the buy-to-let market over the past month. These changes can be attributed to lenders focusing their efforts on their existing borrowers, but this news will be disappointing to any perspective landlords who were preparing to invest in this sector.
There has been an overall fall of 1,304 buy-to-let products in the market compared to the start of March 2020. Product choice for borrowers at 80% loan-to-value has plummeted on both two- and five-year fixed deals by 122 and 134 products respectively, so there are less than 40 deals combined today in these sectors and average interest rates have subsequently risen as well.
Average interest rates on fixed buy-to-let mortgages have risen for borrowers who have a 40% deposit, rates on both two- and five-year fixed rate buy-to-let products at 60% loan-to-value rose by 0.35% and 0.31% respectively since last month, bad news for those looking to invest or refinance at this loan-to-value.
Rachel Springall, Finance Expert at Moneyfacts, said: “It is clear as day to see how the virus pandemic and isolation rules have 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.
“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.
“Existing customers could well be looking to cut down their monthly loan payments or indeed are 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.