Long and winding road down for buy to let landlords

Mortgage products available for buy to let borrowers have dwindled from 4,384 to 307 in the past year. On top of the scarcity of products, buy to letters face steeper interest rates on those still available, according to figures from price comparison site moneysupermarket.com.

The average rate for 75 per cent loan-to-value BTL products has increased by 0.35 per cent to 7.33 per cent in the past year, and by 0.63 per cent to 7.46 per cent for 85 per cent LTV products.

The increase in interest rates means landlords will have to increase rents or find the shortfall themselves. On a £100,000 interest-only mortgage, for example, the rent needed to cover the interest on the mortgage has increased from £569 to £622.

This hike is compounded by the fact, on average, lenders now insist the rental income is 19 per cent greater than the monthly mortgage repayments, up from 13 per cent a year ago. It means, in effect, landlords will need to increase rent by 15 per cent to keep up with these two changes.

Louise Cuming, head of mortgages at moneysupermarket.com, said: "These are worrying times for tenants, landlords and developers. With the cost of living spiraling out of control, tenants are unlikely to be willing to wear increased rental demands.

Those landlords wishing to remortgage buy to let properties will find it difficult, with lenders demanding sizeable deposits or charging higher rates. This could force landlords to re-evaluate whether it is worthwhile staying in the sector in the current climate. With property prices falling though, there may well be many landlords having to sell their investment at a loss.

And, all the while, developers suffer while the bottom falls out of the buy to let market."