Property Master believes that landlords will struggle to get mortgages as the impact of the coronavirus sees lenders pull product ranges, tighten lending criteria and widen margins.
Angus Stewart, chief executive of the online buy-to-let mortgage broker, said: “The competitive and attractive buy-to-let mortgage market appears to be going into reverse as the impact of the Corona virus begins to bite. Landlords are finding that their borrowing options are being drastically reduced as lenders respond to this new record low base rate environment and fears of falling house prices by withdrawing entire product ranges. We have had clients mid-way through a mortgage application only to find the process is halted and the product withdrawn before they can reach completion and the release of funds.
“We can well imagine the difficulties lenders are facing when it comes to valuing properties and properly pricing risk. But we would urge them to continue to support landlord customers, especially those who were moving successfully through the mortgage application process and would otherwise have expected to be shortly in receipt of a loan. Similarly, we would urge banks to stand by the commitment made by the Government to provide payment holidays to landlord customers struggling as the current crisis impacts on the ability of tenants to pay their rent.”
Property Master has observed the following trends in the buy-to-let mortgage market since the Corona virus crisis led to the first emergency Bank of England base rate cut just two weeks ago on Wednesday, March 11th:
Some lenders have chosen to exit the buy-to-let mortgage market altogether for the foreseeable future. Saffron Building Society, which offered a range of mortgages including for portfolio and limited company landlords, currently has no products available saying only that its product range is “under review.” The Melton Mowbray Building Society and Vida have followed suit. Together Money has suspended lending in both the buy-to-let and residential market. Barclays have withdrawn all their products for portfolio landlords.
Tracker buy-to-let mortgages, where the rate charged tracks usually the Bank of England rate plus a set percentage, are being taken off the market. In recent days The Mortgage Works and HSBC have both withdrawn their tracker mortgages for the foreseeable future.
Lending criteria are being tightened. In recent times some lenders have been prepared to lend up to 85% of the value of a buy-to-let property. Fewer are prepared to do so now as fears grow of falling property prices. Kensington Mortgages, for example, are one of those lenders that have reduced maximum loan to value lending criteria down from 85% to 75%.
Widening margins. Whilst landlords might expect a lower Bank of England base rate will lead to lower mortgage rates this is not always proving to be the case. Lenders concerned about the increased risk of tenants defaulting on rents and falling property prices may well choose to widen their margins and increase the cost of borrowing. Some lenders have increased rates despite the 0.65% fall in base rate where margins as a result have increased by about 1%.
Stewart added: “In recent years the buy-to-let market has been characterised by increased competition amongst lenders leading to lower pricing and new, innovative products. We are urging the banks now to continue in that vein and support landlord customers as they deal with this really difficult situation.”