Some buy to let mortgages are now more expensive than before for borrowers, despite the recent fall in the Bank of England Base Rate.
An analysts by online brokerage Property Master shows that some lenders are increasing their margins in response to what they see as the increased risks of tenant rent defaults and falling house prices.
The platform says lending criteria have changed dramatically as a result of Coronavirus, too.
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.
“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. Much of this has now gone into reverse” explains Angus Stewart, Property Master’s chief executive.
Property Master’s May 2020 Mortgage Tracker shows the biggest increase in cost March, before the Coronavirus, to May 1 was for a five-year fixed rate mortgage for a loan amount of £150,000 representing 50 per cent of the value of the property. The cost of this mortgage was up £39 per month.
The same loan but for 65 per cent of the value of the property was up £15 month. For the same loan representing 75 per cent 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 per cent 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 per cent 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 per cent of the value of a property.