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Buy to let market is tough

29 February 2008 / by Joy Tibbs
New data from the Council of Mortgage Lenders shows that the number of approved buy-to-let loans increased in 2007. However, according to, while first-time buyers are finding it difficult to get on the property ladder; first-time landlords are also having a hard time.

Senior analyst at, Alan Harper, says: "For individuals who are not existing homeowners and who are looking to buy-to-let on their first property, the market is even more restrictive. Nearly half of all buy-to-let mortgage lenders won’t lend at all to first-time buyers, leaving 80 per cent less products than in the residential market."

It found that, while this time last year the average buy-to-let loan-to-value (LTV) was 82.8 per cent, it is now just 80.1 per cent. For the average priced house (£189,197) with an average LTV in February 2007, the buyer needed a contribution of £32,542, while in February 2008, the contribution needed was £38,063.

"Despite the recent tail off in house prices, the average new buy-to-let landlord needs to find around £5,500 more now than a year ago to buy their first rented property," says Mr Harper.

The company also found that while 13 buy-to-let lenders were offering 90 per cent LTV in May 2007 when house prices were rising and the market was doing well, just five now offer the deal.

Companies that withdrew their maximum 90 per cent LTV products between September and December 2007 include edeus, Bank of Ireland Mortgages, The Mortgage Works, Wave, Kensington Mortgages, Platform, Scarborough Specialist Mortgages and CHL Mortgages.

Meanwhile, Bradford and Bingley still has seven 90 per cent LTV products on offer, Bristol and West Mortgages, The Mortgage Business and First Trust Bank (NI) all offer two and Mortgage Express has 14.

However, it appears lenders are competing more fiercely for 'safer' business, with the percentage of the market offering 75 per cent LTV or less up 13 per cent to 30 per cent in the last 12 months. This may suit landlords with extensive portfolios who are able to raise larger deposits and take advantage of the best rates, but may price prospective first-time landlords out of the market.

Mr Harper adds: "The typical difference in rate between a comparable mortgage at 75 per cent and one at 85 per cent is around 0.22 per cent. Based on an advance of £150,000 this equates to an additional £27.50 in interest per month, or £34.38 per month more in rental income to meet the typical 125 per cent rental cover required.

"Falling LTVs are unlikely to help those looking to invest in their first buy-to-let property. Landlords with larger portfolios and enough equity to afford a substantial deposit will be better off in the current climate."

© Fair Investment Company Ltd