Buy-to-let mortgages become increasingly hard to get

08 September 2009 / by Andy Davies

The gap between supply and demand for buy-to-let mortgages is widening, according to new figures by moneysupermarket.com.

Since August 2008, enquiries for buy-to-let mortgages have increased by 50 per cent, but the supply of available products has decreased by over 70 per cent in the same period.

In addition, as mainstream mortgage rates have fallen as a result of the decrease in the Bank of England Base Rate, buy-to let mortgages have not fallen at the same pace.

Mainstream mortgages have decreased by 1.95 per cent since August last year, while buy-to-let mortgages have fallen by 1.13 per cent.

According to Hannah-Mercedes Skenfield, mortgage channel manager at moneysupermarket.com, new and existing buy-to-let landlords face a difficult task finding a suitable mortgage.

"Our figures show nearly ten per cent of those looking for a mortgage are looking for a buy-to-let mortgage, but the number of products has fallen by over two-thirds compared to this time last year.

"With significantly less products left on the market and high interest rates attached to those available we could potentially have a ticking buy-to-let time bomb on our hands; the need for rental housing is increasing, but there may not be enough landlords available to cater for this demand," she said.

Ms Skenfield attributes the decrease in supply to banks targeting safer borrowers for their limited mortgage funds, as they have either abandoned or restricted their involvement in the buy-to-let market.

She warned people looking for a buy-to-let mortgage to be aware of fees, she said: "Even if you are lucky enough to meet the tighter eligibility criteria and have found a suitable buy-to-let mortgage product, you must watch out for the fees levied on arranging the deal, as these can be extortionate."

Ms Skenfield also believes first time buyers will be affected by this widening gap.

"It is still increasingly difficult for first time buyers to get on the ladder as a 25 per cent deposit is the normal requirement. As more people look to rent instead of buying, the demand for buy-to-let housing is likely to increase.

"We have already seen rent prices rise, and with a lack of buy-to-let mortgages for new properties, existing landlords will take advantage and continue to hike prices," she added.

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