Mortgage brokers have reported a drought of new buy-to-let business as the reality of rising interest rates hits landlords en masse.
Many buy-to-let investors are now confronted with the choice of increasing rents or selling up, as the average buy-to-let fixed-mortgage rate edges further above 6 per cent.
For months, brokers have been reporting a die off of new buy-to-let enquiries, and many had previously warned that more trouble was brewing as a result of stringent stress-testing by lenders.
The situation has deteriorated further in recent weeks with lenders continuing to hike rates and further tighten stress-testing.
Earlier this week, NatWest, one of the UK’s largest mortgage lenders, increased the stress test on its two-year fixed-rate buy-to-let mortgage from 6.7 per cent to 8.10 per cent and upped it from 6 per cent to 6.89 per cent on its five-year fixed product.
“I’ve been a mortgage broker for years and I’ve never seen the market like this,” self-employed broker, Zara Yeganeh told FTAdviser.
Yeganeh explained that over the last two weeks, the monthly payments on every buy-to-let case she completed have at least doubled.
In Yeganeh’s view, the combination of difficulties present in the buy-to-let sector - high rates, taxation issues, inconsistent valuations, affordability problems - are all about to coalesce and “crash the market”.
Yesterday, a report from the Intermediary Mortgage Lenders Association flagged similar issues, with the trade body being highly critical of the impact proposed legislative changes may have on the sector.
While many specialist buy-to-let lenders have now returned to the market this week, the arrangement fees have all increased and Yeganeh pointed out that while she is still getting some new enquiries from potential buy-to-let investors, they are only coming from people with hefty deposits.
The buy-to-let mortgage market is currently so uncompetitive that Yeganeh said all of her portfolio landlords coming off their fixed rates have had no choice but to do a product transfer with their existing lenders.
Similar to Yeganeh, mortgage brokerage London Money has analysed all of its buy-to-let remortgages since the beginning of the year and on average each has seen a 102 per cent increase in the monthly mortgage payment.
“This has led to a number of landlords now choosing to exit the market and we have spoken with five this week who are planning to offload some or all of their portfolio,” London Money’s founder Martin Stewart told FTAdviser.
“These properties are held in their individual names and so we may now see the market polarise between those who tickled with the sector and those who incorporated their portfolio and view it as a long term play.
