Jane Simpson is managing director of TBMC
The buy-to-let (BTL) mortgage market has, unsurprisingly, experienced significant turbulence since the beginning of the coronavirus lockdown, meaning the profile of lenders and products available to landlords has changed.
To begin with, some lenders have withdrawn from the market. A number of these, typically non-banks, should be temporary as they wait for funding lines to become available, but there may also be long-term casualties, unable to return to BTL lending post-crisis.
REDUCED PRODUCTS
The overall number of buy-to-let mortgage products has dropped markedly. Moneyfacts reported that 1,304 products had been taken off during March, with changes continuing throughout April.
It was reported that 5-year fixed rates took the biggest hit, followed by 2-year fixed rates. Some lenders have also responded by reducing their maximum loan-to-values (LTVs), resulting in a significant dent in the 80% LTV market, and the removal of 85% options.
This may cause challenges for buy-to-let clients with more highly leveraged properties when they are looking to remortgage, and in turn deter those without high deposits from making purchases.
We have also seen lenders modifying their lending criteria, especially in the complex buy-to-let sector, which may allow the remaining specialist lenders offering, for example, finance for houses of multiple occupancy (HMOs), limited companies and multi-unit blocks, to take a large slice of the pie. Interest rates have increased on several ranges, which will be disappointing to landlords, especially as the mortgage interest tax relief scheme for buy-to-let properties was finally phased out in April, creating additional costs for many rental property businesses.
However, there are still competitive rates to be found.
DESKTOP VALUATIONS
The countrywide lockdown means visual property inspections are no longer possible. For this reason, some lenders have suspended offering new purchase finance.
However, there are a growing number of providers which have switched to using desktop valuations or automated valuation models (AVMs) during this unprecedented time, to allow business to continue.
The government has advised against house moves during the crisis, which has inevitably slowed the housing market and impacted on buy-to-let purchase transactions.
However, it does mean that there is likely to be a pent-up demand for buy-to-let finance once lockdown measures are lifted and movement in the market is resumed.
This is obviously a challenging time for intermediaries in the buy-to-let sector, but also a time when landlord clients can benefit from our support.
Being able to answer questions about the availability of finance or other relevant issues, such as buy-to-let mortgage holidays (available for both personal name and limited company mortgages), will be appreciated.
Many landlords could save themselves money by remortgaging, so it is also worth offering to review your landlord client’s whole portfolio during this period.
There may be options available to them to release some equity, which could help to ease the pressure on their buy-to-let businesses in the current circumstances.
REMORTGAGE BUSINESS
At TBMC, we are paying particular attention to remortgage business, as many of our clients have mortgages coming to the end of their initial rates during the next couple of months.
There are still plenty of options to choose from and solutions to be found for most scenarios, which is where having buy-to-let expertise comes to the fore
