Covid-19 Impact on Buy To Let and General Update

We are 2 months into the Coronavirus lockdown and after an initial period of uncertainty and flip-flopping by Banks & other mortgage providers, some stability has come to the market with certain banks that initially reneged on providing mortgages now offering them again, albeit with either stricter lending criteria or higher deposits required.

As a general point of information, 3 month mortgage holidays are still available from all major mortgage providers with 1 in 9 people with an active mortgage currently opting for this.

The buy-to let market has seen some interesting developments, with four of the lenders that initially withdrew their BTL mortgage offerings – Santander, Clydesdale, Precise Mortgages and Kent Reliance – now lending again. 

Also Nationwide’s specialist buy-to let-arm The Mortgage Works has launched new mortgage products – and reduced selected five-year fixed rates. The New five-year fixed rate mortgages are available at 1.69% with a £1,995 fee or 1.94% fee-free up to 50% LTV.

HSBC, however, has withdrawn entirely from the buy to let market until further notice. They are joined by Foundation Home Loans, Platform Home Loans, State Bank of India, Together Money, Vida Home Loans and Furness Building Society in sitting out the BTL market for now.

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The good news is that although there are fewer options for landlords ands investors, there are still plenty of good value buy to let mortgage options available. First-time landlords may struggle a little at higher LTV (loan-to-value) with existing and portfolio landlords likely to be looked upon more favourably by lenders.
A large number of 80% LTV five-year fixed rate BTL products have been pulled from the market – about 90% of them, but we here at Mortgages and Insurers will be able to find you a competitive deal while the deals are still out there for now.
With valuers banned from visiting homes remortgaging is intrinsically harder than it was before the Coronavirus lockdown.There are however lenders offering mortgages using automated rather than physical valuations, and a lot of our landlord clients can take advantage of this. Companies such as Shawbrook and Paragon are using virtual valuations for loans against standard properties up to 75% of loan to value.
In terms of the rates themselves, despite two cuts in the Bank of England base rate, Buy-to-let rates have crept up in most categories since March, analysis by Property Master reveals.

The buy-to-let broker found that average five-year fixed rates at 50 per cent loan-to-value increased by 31 basis points from 1.94 per cent to 2.25 per cent between March 1 and May 1.

– At the same LTV, average two-year fixes rose by 28 basis points from 1.62 per cent to 1.9 per cent.

– Two-year fixes at 65 per cent LTV increased by 12 basis points and five-year fixes at the same LTV rose by 11 bps.

– At 75 per cent LTV two-year fixes rose by 6 bps but five year fixes came down by 4 bps.

Property Master chief executive Angus Stewart says: “The mortgage industry’s response to the Coronavirus has totally transformed this marketplace. The past year up until now was one of continuing falls in the cost of buy-to-let mortgage borrowing as new lenders competed hard for landlord business.”

“We also saw lenders becoming more innovative by introducing new products in response to changing demand as landlords looked to diversify into new sectors such as holiday lets and houses of multiple occupation. Much of this has now gone into reverse.”

Stewart adds: “Our research out today shows that the cost of borrowing is up for some types of loans from some lenders despite the sharp falls in the Bank of England base rate.  “Undoubtedly there are lenders widening their margins in response to the increased risks of tenant rent defaults and falling house prices. 
“But for me what is more striking still is how much lending criteria have changed in response to the pandemic.  
“After an initial flurry of lenders leaving the buy-to-let market altogether they are now returning but a number have reduced their LTV criteria, capped the amount they will lend or are ruling out various sectors such as HMOs, multi-unit blocks and holiday lets.”
Our advice, as always is to strike while the iron is hot and if there is a mortgage or remortgage available to you at a rate you like, now is the time to get it. Speak to one of our brokers who will be able to advise you in more details.

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