Buy-to-let mortgage market hit by credit crunch

News Category: Industry News

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The buy-to-let mortgage market is beginning to be hit by the international credit crunch, new research has shown.

Julia Harris, mortgage expert at Moneyfacts.co.uk, explained that the recent international finance markets have begun to impact the UK's buy-to-let lenders, who have started to tighten credit criteria, increase fees and remove products.

"The most obvious change comes by way of amending the minimum rental cover required effectively raising the minimum rent required to cover a given mortgage repayment, either by raising the cover percentage, increasing the underlying rate or withdrawing the lower cover products," Ms Harris explained.

"The trend over recent years has been a falling rental income cover requirement, so with lenders reversing this trend, it’s a definite sign that some are taking a more cautious outlook."

She added that some lenders had withdrawn their entire range of buy-to-let mortgages, while others had scrapped their tracker or variable options.

"The outlook may not be all doom and gloom for the buy-to-let landlord, although borrowing costs are rising, yields are beginning to fall and the potential to gain from capital appreciation is declining," she concluded.

"If the residential mortgage market sees increasing arrears, repossessions and first time buyers continuing to be priced out of the market, the demand for rented properties will undoubtedly increase."

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