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Buy-to-let bubble burst by mortgage market and house prices

12 June 2009 / by Rachael Stiles
Almost a third of Brits believe that buy-to-let investors in the UK are going to make a loss on their property investment as a result of the recession, research from has found.

While 28 per cent of Britons think that the current climate will result in a loss for buy-to-let investors, a further quarter believe that they will break even, not making a loss from the credit crunch, but also not profiting from their investment.

Buy-to-let mortgage lending continues to decline, and has found that consumer confidence has fallen with it, with investors feeling the effects of a tighter lending market after benefitting from years of relatively easy access to credit and rising house prices.

Now that house prices have fallen drastically, many buy-to-let property owners are finding it hard to refinance their mortgage, or to find an interest rate that they can afford.

The housing market has also forced many homeowners into letting their house out instead of selling, either because prices are too low or properties are spending so long on the market, so it has turned into a renter's market, making it increasingly difficult for landlords to secure a tenant who pays enough rent to cover the mortgage.

Whilst the wider mortgage market has seen an improvement in affordability recently, with higher loan to value (LTV) deals and lower interest rates, this does not seem to have reached the buy-to-let mortgage market.

Buy-to-let rates have remained higher than residential mortgages, and usually require at least a 25 per cent cash deposit.

"The years of the booming property market made investing in bricks and mortar very attractive. But unfortunately this boom couldn't continue forever and those invested in the buy-to-let property market may now be facing losses due to the current economic climate," says David Elms, chief executive of

"Furthermore, the number of buy-to-let mortgages on offer has greatly reduced, meaning those lenders remaining in the buy-to-let space have tightened their lending criteria making funding even harder to find for potential landlords."

Mr Elms urges any buy-to-let landlord who is struggling with their mortgage payments, or anyone who is considering entering the buy-to-let market, to seek advice from a specialised whole of market mortgage advisor.

"A whole of market mortgage adviser can also talk you through the opportunities and potential pitfalls of the buy-to-let market and whether this is appropriate for you," he said.

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