The buy-to-let mortgage market was particularly adversely affected by the global credit crisis. At its lowest point, in September 2009, 95% of all deals available at the market’s peak in August 2007 had been withdrawn. However, the buy-to-let market “has now started its fight back”, according to the Moneyfacts.co.uk website.
The number of available buy-to-let mortgages increased by 70% between September 2009 and 19th May 2010, from 179 to 304, with a higher percentage of these deals being for loan to value amounts of 70% or above than had been available previously. Average rates also began to drop with the greater number of lenders that appeared onto the market. If you are interested in entering the buy-to-let sector you should consider getting comprehensive landlord insurance.
According to the Moneyfacts.co.uk statistics, there were 3,662 BTL loan products available at the market’s peak in August 2007, which declined to an ultimate low of 179 in September 2009. The percentage of all available deals offering a maximum loan-to-value amount of 70% in September 2009 was 21.4%, which rose to 25.82% of all deals as of May this year. Similarly, the percentage of all deals that offered a maximum LTV of 75% increased from 24.2% to 29.07% in the same timeframe. The percentage of all BTL loans offering a maximum LTV of 80%, meanwhile, was a mere 1.4% last September, rising to 4.24% of total deals in May this year.
Among the lenders increasing their LTV amounts was The Mortgage Works, the specialist lending arm of the Nationwide Building Society, which increased its maximum LTV to 80% for the first time in a decade through a range of seven different fixed rate and tracker mortgages. The Bank of China, Kensington and Aldermore have also all recently announced entries into the buy-to-let mortgage market.
Spokesman for Moneyfacts.co.uk, Darren Cook commented: “This is encouraging news for investors, especially those who were locked out of the market as the maximum available LTV’s fell. Competition has returned to the market, as lenders make cuts to their new borrowing rates. Saffron and Melton Mowbray Building Societies have returned to the market during the past month, while new lender Bank of China continues to successfully find its niche. Both are signs that this market is starting to become a more viable and safer option for lenders.
“Predicted changes to capital gain tax (CGT) could put the recovery of the BTL sector off track. Government sources predict that CGT on non-business assets, including buy-to-let properties, could rise from 18% to a figure that could be as high as 40%. In a separate blow the annual exemption limit for CGT, currently £10,100, may come down to as low as £2,500. This will bring hundreds of thousands more people into the tax net. One possible consequence could be an increase in the preferred investor properties on to the market as people scramble to take ay current gains.
“The changes could spark a downward price spiral, but could create opportunities for both homebuyers and potential landlords.”