Buy to let mortgage market leaving investors dazed and confused

07 July 2009 / by Rachael Stiles

Buy-to-let investors are losing faith in the mortgage market and giving up hope of finding a better deal, according to research from property portfolio management company Young Group.

Recent movements in the economy have made borrowing increasingly expensive, and buy-to-let mortgage lending has been one of the sectors to bear the brunt of the credit freeze, facing higher interest rates and tighter criteria to secure a deal.

Meanwhile, some investors who are already on a buy-to-let mortgage might assume that with the base rate at an all time low of just 0.5 per cent, by dropping onto a lender's variable rate when their deal comes to an end, their interest rate will follow suit.

The latest Young Index, surveying investor market sentiment in the second quarter of 2009, shows that fewer than one in four residential buy-to-let investors are regularly paying close attention to their mortgage options.

Contrastingly, more than 80 per cent of investors were actively tracking available mortgage deals this time last year, compared to 24 per cent in Q2 2009, suggesting a loss of faith in the buy-to-let mortgage market.

In Q2 of last year, investors were behaving much more proactively about reassessing their mortgage options, with 65 per cent regularly evaluating whether they were getting the best deal available to them, but in 12 months this figure fell to 12 per cent.

By the close of Q2 this year, 32 per cent of buy-to-let mortgage customers admitted to re-evaluating their investment less than one a year.

Neil Young, CEO of Young Group, explains: "With the base rate at such a low level compared to its long term average, many people have stopped reviewing the different mortgage options available to them as regularly as they once did."

Settling for a lender's standard variable rate might seem like the easiest thing to do, Mr Young argues, and investors might think that with interest rates at rock bottom this will provide the best value, but this may not necessarily be the case.

"Just because there are fewer mortgage products available, investors shouldn't take their eye off the ball.  Arguably, now is the time to be paying MORE attention to the mortgage market to avoid the risk of losing out when base rate inevitably rises in the future," Mr Young added.

Because mortgage rates can change and new products can appear on the market overnight, mortgage customers need to "keep on top of the market," he said, because some of the best deals are often fully subscribed within the first few days of going on the shelves.

© Fair Investment Company Ltd