Changes in the UK Buy To Let Market

2008 has seen some of the biggest changes to Buy to Let mortgage criteria since they were introduced in 1994. The ‘credit crunch’ has meant that lenders are more selective about whom they will lend to and the type of propositions they will lend on.  If you haven’t been actively looking at funding for your portfolio recently, some of the changes may come as a bit of a surprise and changes are still occurring now on a daily basis.

Here’s what you should know…

Availability of mortgage products
The number of Buy to Let products available has fallen 60% since the onset of the credit crunch. An increasing number of investors are asking for funding for certain property or tenant types, rather than asking simply for the best rates.

New build property
New build property (which come lenders may also classify as properties, flats or houses built or converted in the last twelve months) has been a particular cause of anxiety for Buy to Let lenders. It is increasingly common for lenders to refuse to lend on this type of property altogether.
New builds is the one are of concern in the sector, particularly in come city centres where supply is outstripping demand and the fact that twelve months are classed as new build may come as a surprise to many investors. It is still possible to fund new build Buy to Let property but funding options are extremely limited.

Loan to values

Some lenders are asking investors to put down larger deposits by lowering the maximum loan to value they will lend at. In the last five years, Buy to Let lenders have lent at 85% loan to value, with many lending up to 90% loan to value last year. However, some lenders are now introducing a maximum loan to value of 75% to 80%. The move is fairly widespread across the marketplace with some lenders making definite moves to increase deposit requirements.

First time Buy to Let investors

First time Buy to Let buyers are also likely to find their mortgage options decreasing. Some mortgage lenders are no longer lending to first time landlords but it remains to be seen if this will become the market ‘norm’.
Products available for a shorter time
Lenders are increasingly withdrawing products with little or no warning due to concern about lending beyond their available funds. Competitive products have a very short shelf life in the current market and we would urge investors to act fast to secure funding otherwise you’ll be disappointed.
The changes in the  Buy to Let mortgage criteria cannot solely be attributed to lender worries about the credit crunch and the need to ensure loans are as prime as possible. The credit crunch has meant fewer organisations are lending because securitised lenders are having difficulties securing funds at a rate competitive enough to re-enter the market.
As a result, the lenders remaining are receiving a much higher number of applications and as a result have been lending in elevated volumes. Such actions may be partly being used as short term mechanisms to lessen the volume of applications lenders are receiving, allowing them to achieve smaller lending volumes they find comfortable. However many of the criteria are likely to remain and current mortgage criteria are generally now aligned to the product offering we were seeing 5 years ago. The overriding considerations for Buy to Let lenders in the remainder of 2008 will be ‘quality’ and ‘low risk’ applications.

Article Author

Article by Johnathon from Mortgage for Business who offer a range of Buy To Let mortgages for landlords