"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."
There has been an overall fall of 1,304 buy-to-let products in the market compared to the start of March 2020, from 2,897 to 1,593.
Product choice for borrowers at 80% LTV has plummeted across both two and five-year fixed deals by 122 and 134 products respectively, so there are less than 40 deals combined today in these sectors.
As a result, average interest rates have subsequently risen. At 80% LTV, two-year fixed rates have risen by 0.20% and five-year rates by 0.21%.
Average interest rates on both two and five-year fixed rate buy-to-let products at 60% LTV rose by 0.35% and 0.31% respectively over the month.
Rachel Springall, Finance Expert at Moneyfacts, 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.
“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.”
