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Buy-to-let products dwindle

Wednesday, 13 August 2008 12:00 AM

The number of products available to potential buy-to-let investors in the UK property market has dwindled into insignificance following the global liquidity crisis.

According to new research, the number of available mortgages in the sector has fallen from 4,384 to 307 in the past year as lenders tighten criteria and remove products.

Furthermore, those buy-to-let mortgages which do remain come with higher interest rates, finds research from price comparison site MoneySupermarket.com.

"These are worrying times for tenants, landlords and developers," explained Louise Cuming, head of mortgages at the site.

"With the cost of living spiralling out of control, tenants are unlikely to be willing to wear increased rental demands."

The average rate for 75 per cent loan-to-value (LTV) buy-to-let products has increased by 0.35 per cent to 7.33 per cent in the past year.

This has been accompanied by a 0.63 per cent rise in 85 per cent LTV products to 7.46 per cent.

The increase in interest rates means landlords will have to increase rents or find the shortfall themselves. On a £100,000 interest-only mortgage, for example, the rent needed to cover the interest on the mortgage has increased from £569 to £622.

"Those landlords wishing to remortgage buy-to-let properties will find it difficult, with lenders demanding sizeable deposits or charging higher rates," continued Ms Cuming.

"This could force landlords to re-evaluate whether it is worthwhile staying in the sector in the current climate.

"With property prices falling though, there may well be many landlords having to sell their investment at a loss."

Chris O'Toole

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