Property Master’s latest Mortgage Tracker reveals after a year of sustained falls in the cost of fixed rate buy-to-let mortgages, some rates have risen since the onset of coronavirus despite two recent base rate cuts.
The May 2020 Mortgage Tracker shows the biggest increase in cost from March, before the coronavirus, to 1 May was for a five-year fixed rate mortgage for a loan amount of £150,000, representing 50% of the value of the property. The cost of this mortgage was up £39 per month.
The same loan, but for 65% of the value of the property was up £15 month. For the same loan representing 75% of the value of the property the cost fell by £12.
A similar pattern was seen in the cost of two-year fixed rate buy-to-let mortgages. The monthly cost of a typical £150,000 mortgage for 50% of the value of the property fixed for two years increased by £34 per month March to May. Two-year fixed rate mortgages for the same amount for 65% of the value of a property increased by £17 per month whilst the cost fell by £5 per month for the same loan representing 75% of the value of a property.
Angus Stewart, Property Master’s chief executive said: “The mortgage industry’s response to the coronavirus has totally transformed this marketplace. The past year up until now was one of continuing falls in the cost of buy-to-let mortgage borrowing as new lenders competed hard for landlord business. We also saw lenders becoming more innovative by introducing new products in response to changing demand as landlords looked to diversify into new sectors such as holiday lets and HMOs (Houses of Multiple Occupation.) Much of this has now gone into reverse.
“Our research out today shows that the cost of borrowing is up for some types of loans from some lenders despite the sharp falls in the Bank of England base rate. Undoubtedly there are lenders widening their margins in response to the increased risks of tenant rent defaults and falling house prices. But for me what is more striking still is how much lending criteria have changed in response to the pandemic.
“After an initial flurry of lenders leaving the buy-to-let market altogether they are now returning but a number have reduced their loan to value criteria, capped the amount they will lend or are ruling out various sectors such as HMOs, Multi Unit Blocks and holiday lets. A new level of complexity has been introduced which I believe only a technology-based solution such as ours can effectively navigate.”