Coronavirus pandemic leads to fall in BTL mortgage deals

There has been a significant fall in buy-to-let (BTL) mortgage deals since the start of March 2020, revealing the impact the Coronavirus pandemic has had on the market.

Data to be released in the Moneyfacts UK Mortgage Trends Treasury Report shows that since the beginning of March 2020 to today there has been an overall fall of 1,304 BTL products in the market. In addition to this, the product choice for borrowers at 80% loan-to-value has fallen by 122 on two-year fixed deals and 134 on five-year fixed deals.

Along with the drop in products, there has also been a rise in interest rates on existing products since the beginning of March 2020. For example, the average interest rate on a two-year fixed BTL deal at a 60% LTV has increased by 0.35% and on a five-year fixed deal at the same LTV has also increased by 0.31% in the last month. It should be noted that the average rates on all LTVs on both two and five-year LTVs have fallen, however this is due to products within higher LTVs being withdrawn from the market and not a fall in rates on existing or newly launched BTL products.

Buy-to-let market analysis 

Average rates

While average BTL mortgage rates have risen over the last month, there are still some competitive deals available in the BTL charts. For example, the lowest rate currently on offer in the first time landlord chart is from NatWest which offers 1.35% fixed until 30 June 2022 on a 60% LTV. Meanwhile, in the Buy-to-Let Limited Company Mortgage selection chart the lowest rate currently comes from Paragon Bank which offers 2.95% fixed for two years on a 75% LTV. However, as the Coronavirus pandemic continues to disrupt the economy it is uncertain how long the most competitive deals will stay in the charts.

Commenting on the impact of the Coronavirus on the BTL mortgage sector, Rachel Springall, finance expert at Moneyfacts.co.uk, said: It is clear as day to see how the virus pandemic and isolation rules have led to a huge shake-up in the choice and cost of buy-to-let mortgages. This couldn’t come at a worse time, as from this new tax year, mortgage interest tax relief has been completely phased out for buy-to-let landlords – which allowed them to deduct mortgage expenses from rental income to reduce a tax bill.

“The fall in choice and rise in interest rates will be a blow to landlords who are considering investing, however the market has moved in this way to protect providers’ existing books. Even if some believe the property market to be ripe to invest in, prospective borrowers who don’t have a decent deposit could well be discouraged.

“Existing customers could well be looking to cut down their monthly loan payments or indeed are concerned about rental payments. Thankfully, lenders will allow borrowers to defer their mortgage repayments for three months as of last month, but landlords must act now and check online to see how tenants falling onto universal credit or local housing allowance could impact their rental cover ratio. As interest rates rise, landlords would be wise to move quickly to remortgage.”

She added: “The optimism seen at the start of this year for a prosperous buy-to-let market in 2020 could well have waned in light of the virus, and as margins grow tighter, it’s vital landlords consult a financial adviser and keep in regular contact with their tenants to get through these uncertain times.”