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Mortgage crisis spreads as buy-to-let loans disappear

house for sale, sale fell through
house for sale, sale fell through

Buy-to-let landlords are struggling to take out fixed-rate mortgages, with just a handful of deals remaining on the market after recent withdrawals.

Two-year fixed-rate mortgages have disappeared from the market in the last few weeks. At close of business on Wednesday just two of these mortgages for buy-to-let landlords purchasing in through a company were available, according to Mortgages for Business, a buy-to-let broker.

A further 67 two-year fixed-rate deals remain available for landlords purchasing as individuals. Experts said the number of fixed-rate deals on the market was down by 70pc.

Lenders have made mass withdrawals of mortgage deals in recent weeks, triggered by fears of much higher than expected interest rate rises, making fixed-rate mortgages very difficult to price. Affordability tests have also become stricter, with some lenders asking landlords to prove they can afford rates of 8.49pc, experts said.

Short-term fixes are the most difficult for lenders to price, as forecasters expect interest rates to rise steeply in the coming months, before peaking in the middle of 2023.

Jeni Brown, of Mortgages for Business, said while the number of buy-to-let deals had halved since the mini-Budget on September 23, the number of fixed-rate buy-to-let deals had fallen by around 70pc.

“There’s no question that it’s harder to get a fixed-rate buy-to-let mortgage deal at the moment. Lenders are taking shelter from the economic tsunami that followed in the wake of the mini-Budget,” Ms Brown said.

Landlords purchasing in a limited company – a tax efficient structure that lets investors offset their mortgage interest payments against their tax bills, unlike those purchasing in their own names – now have 165 options, according to Mortgages for Business.

Of these, 110 were fixed-rates. The vast majority – 95 – were five-year fixes.

Landlords purchasing as individuals had 329 deals in total, of which 254 were fixed.

On June 1, there were 3,484 buy-to-let mortgage deals on the market, according to Moneyfacts, a data provider. By September 29, this number had plunged 75pc to just 862. This week the number has recovered to 1,057, but this still represents a 70pc drop compared to the summer.

As lenders slowly relaunch deals, prices are rising. Over the same period, the average rate has nearly doubled from 3.32pc to 6.4pc, according to Property Master, another buy-to-let broker.

The cheapest buy-to-let deal available is now at 3.29pc, according to Property Master. This was more than three times the lowest last year, which charged 0.99pc.

Not only are deals becoming more expensive, but lenders’ affordability tests are becoming tougher. Angus Stewart, of Property Master, said: “The major route that lenders are using to restrict and manage their borrowings are changes to the stress rate.” Some lenders now test that landlords can afford to make payments at 8.49pc, he said.