Jeff Knight, director of marketing for GMAC-RFC, said lenders face the increasing problem of rents not keeping pace with interest rate increases and must find new solutions to deal with decreasing rental yields.
Knight said: “Interest rates are going up while rents aren’t and it’s a problem lenders must look at. Product design needs to respond to changes in the market. Those who could get a mortgage three months ago won’t get one in three months if rates continue upwards.”
However, Gus Park, head of buy-to-let mortgages for Mortgage Express, felt the market had already seen a lot of innovation, though more was always welcome: “There is quite a range of choice for borrowers struggling to get the right amount of rental cover. A major trend has been rental yields tightening as interest rates have risen and those on variable rates have struggled. But most investors are interested in long term capital gain and for most it is enough to cover the mortgage. Not many expect to make a significant income.”
Melanie Bien, associate director at Savills, commented: “The BTL market has been very good for the last few years and products have fantastic rates. With interest rates rising, most lenders have adjusted their criteria slightly as it’s a constantly evolving process and better products will come. The market will continue to respond and it’s a very encouraging sign that the expected BTL crash hasn’t happened.”
Knight added: “Every year, people say the BTL bubble will burst. Yet, if the market is good then investors get capital growth, and if the market declines than the demand to rent goes up, so it evens itself out.”
