BTL Mortgage Update

Since the start of the credit crunch the whole world in the buy-to-let mortgage market has seen a dramatic change. Landlords now trying to find a buy-to-let mortgage or obtain a remortgage on their investment property will be more than aware of this.

Property Hawk is dedicated to keeping landlords up to date with the developments in the buy-to-let credit markets so that landlords can make those key financial decisions concerning their property portfolios.

Michael Algony marketing executive of Mortgages For Business one of the largest buy-to-let mortgage brokers give landlords an insight into just what is happening in the buy-to-let mortgage markets.

2008 all change for landlords
Every news report seems to invariably contain a story about the ‘credit crunch’ and its effects on personal finance and borrowing availability. Since the start of 2008 we’ve seen changes in both the quantity of BTL mortgages on offer and the criteria on those products that are available.

So what does the current Buy to Let mortgage market look like:

Tightening of distribution channels:
The key consideration of lenders is the quality of mortgage applications they receive. With this in mind lenders such as Mortgage Express have significantly reduced the number of brokers they will accept mortgage applications from. We’re delighted to have been handpicked to continue to be able to offer Mortgage Express’ product range. This trend looks set to continue as regulatory bodies and corporate governance place increasing scrutiny on lending.

Loan to Values:
There has been a definitive shift in the maximum loan to value available to investors. Most products now require a 25% deposit, fewer require a 20% deposit and 15% deposit mortgages are now almost non-existent. It seems unlikely in 2008 we will see loan to values on offer increasing.

Pricing:
The majority of Buy to Let products remain priced above 6.5%. This has been the case for some months, however we are starting to see signals that pricing may move downwards. LIBOR (London Interbank Offered Rate), the rate banks lend each other money and basis for mortgage pricing, has started to slowly lower after stubbornly staying at just below 6%. Meanwhile SWAP rates, the basis of fixed rate mortgage pricing, has also began to lower after a period of inflating.

Criteria:
Most buy-to-let lenders have limited funding and ‘quality’ is the key driver in lending decisions, with most institutions continuing to take a cautious approach. New builds remain unfavourable amongst lenders as do first time Buy to Let investors.

Product availability:
The number of Buy to Let mortgage products in the marketplace remains far lower than many investors may have become accustom to in the last few years. Securitised lenders such as Paragon and Northern Rock, who borrow funds for the money market to support their mortgages, remain unable to begin lending again as the cost of borrowing remains high and financial institutions continue to be unwilling to lend to them.
Meanwhile specialist niche buy-to-let mortgage brands belonging to banks and building societies have limited tranches of funds because their larger parent firms have less cash readily available.

“Overall the Buy to Let lending market is still in a situation where lenders are focusing on ‘low risk’ and ‘quality’ applications.”

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To discuss your Buy to Let mortgage needs in light of current market conditions please call 0845 148 9168 quoting Property Hawk to make sure you get the best rates available.

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Disclaimer – The information and services provided by the Property Hawk website ("Website") does not constitute legal, financial, investment or tax advice. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser prior to entering into any binding contracts.