Buy-to-let mortgage searches were down 23% in April compared to the previous month, while investors have been putting down larger deposits as high-interest rates bite.
Research by Twenty7tec shows that average loan-to-value (LTV) has dropped considerably over the past year, from 66% in April 2022 to 61%.
London average BTL property prices have fallen by 4%, while loans required dropped 15% as landlords put larger deposits down. National average BTL property prices increased 0.6%, while loans required dropped 8%.
Those looking to buy had, on average, higher combined incomes of £68,907 (up 4% nationally compared to March) and £88,276 in London (up 3%).
Lee Grandin (pictured), MD of Landlord Mortgages, says the significant increase in interest rates has impacted landlords’ ability to finance.
“Assuming rental income remains static, then as interest rates rise the landlord is forced to borrow less,” he tells LandlordZONE. “This means fewer mortgages can be granted at the funding level landlords want and if property values remain static this drives down the loan to values.”
Dropped
Mortgage product volumes have dropped by about 50% in the max LTV 65% range, explains Nathan Reilly, director at Twenty7tec, who says the real driver for increased use of max LTV 60% products is that landlords are trying to rebalance their portfolios to reduce their costs.
“The drop from 65% to 60% is a breakpoint which yields real benefit to landlords looking to offset the increasing interest rate environment.”
Reilly says there has been a 10% bump in 65% product availability during the past month, but where possible, he expects landlords to continue to use the lower max LTV products until they see interest rates go down.
“Why have searches gone down? It’s hard to say for sure, but interest rate uncertainty must be one overarching factor,” he tells LandlordZONE.
