Buy-to-let mortgages plummet 93pc in a year
By Myra Butterworth, Personal Finance CorrespondentLast Updated: 10:12pm BST 08/08/2008
The
number of buy-to-let mortgages has plummeted by 93 per cent in the past
year leaving tens of thousands of novice landlords struggling to find
affordable deals.
Figures revealed to The Daily
Telegraph show there were 4,384 mortgages available to landlords 12
months ago compared with just 307 deals today.
Experts
said the sharp fall in the number of buy-to-let loans available will
hit the estimated 110,000 novice landlords with only one buy-to-let
mortgage because they do not have a portfolio of properties to help
cushion the blow of a slowing market. Landlords are also having to cope
with higher interest rates on those mortgage deals that are still
available.
The research, by price
comparison website Moneysupermarket.com, revealed that buy-to-let
mortgage rates have jumped 0.63 per cent to 7.46 per cent during the
past year for landlords looking to borrow 85 per cent of the value of
their property.
Repossessions soar 50pc to 12-year highThe
increase in rates mean 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 monthly mortgage payments has
increased from £569 to £622.
Lenders are applying
much stricter lending criteria on their buy-to-let deals. On average,
lenders now require the rental income to be 19 per cent greater than
the monthly mortgage repayments - up from 13 per cent a year ago to
qualify for a buy-to-let deal. The research revealed that, in effect,
landlords will need to increase the rents that they currently charge by
15 per cent to keep up with the changing market.
Louise Cuming, head of mortgages at price comparison website moneysupermarket.com, said the research indicated "worrying times" for tenants, landlords and developers.
She
said: "Landlords wishing to remortgage buy-to-let properties will find
it difficult, with lenders demanding sizeable deposits or charging
higher rates. 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."
There are almost 1.1 million buy-to-let mortgages outstanding, according to The Council of Mortgage Lenders (CML).
Experts
said many property investors were being forced to move automatically
onto their lender's standard variable rate (SVR) as they were unable to
find a cheaper new deal elsewhere.
Melanie Bien, of
Savills Private Finance, a mortgage broker, said: "The cost of
remortgaging means many are staying put on their lender's standard
variable rate rather than pay a fee of 2 per cent or 2.5 per cent to go
onto an unspectacular rate.
As novices tend not
to have a surplus of cash from their lettings business because they
haven't been doing it for long and don't have many properties they may
have to dip into savings to meet the shortfall. Selling up is a last
resort when prices are falling and the number of transactions has
declined so much."
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