Buy to Let mortgages update
In the first couple of months of the coronavirus pandemic, the number of mortgages available in the market dropped by around half and most of the higher Loan To Value (LTV), higher-risk products were withdrawn entirely.
However, five months into the crisis, lenders are aware that there will be people looking to take advantage of the current situation and buy investment properties. In June and July, 283 more buy to let products were added to lenders’ ranges, fairly evenly split between two-year and five-year fixed deals. And, while LTVs are at a maximum of 75% across virtually the whole of the market, reflecting the increased risk factors of tenants struggling to pay rent and capital values potentially dropping, there are some attractive deals.
Why might now be a good time to invest?
The government announced this month that the UK has officially entered a recession and stock markets around the world may be volatile for some time, given the uncertainty over the progression of the coronavirus pandemic. As such, more investors may be considering moving into property as a longer-term investment option, particularly with the financial incentive of the temporary increase in the standard stamp duty threshold.
And for existing landlords looking to expand their portfolios, economic uncertainty can often present opportunities to secure property at a discount. That, together with the saving that will be made on stamp duty, means the next 6 months could be a very good time to buy.
As it currently stands, most of the best two and five-year fixed BTL deals offer a maximum 60% LTV. Four such deals available as at mid-August:
Two year fixed, 60% LTV
|Post Office Money||1.50%||30.11.2022||4.59% variable||£1,495|
Five year fixed, 60% LTV
|Virgin Money||1.79%||01.11.2025||4.54% variable||£1,995|
|Skipton BS||1.85%||31.10.2025||4.84% variable||£995|
For investors with less deposit available, Virgin Money is offering some of the most competitive products at 75% LTV, with a two-year fixed rate of 1.64% and a five-year fixed rate of 2.04%. After the initial fixed term, both revert to 4.54% variable, with a charge of £1,995 in product fees.
And for those buying their first BTL property, there are a range of good deals at between 60% and 75% LTV, including:
|Lender||Max LTV||Initial rate||Reverts to||Fees|
|NatWest||60%||1.35% (2yr fixed)||4.09% variable||£995|
|Leek United BS||65%||1.85% (2yr fixed)||5.19% variable||£0|
|Principality BS||75%||2.15% (2 yr fixed)||4.40% variable||£0|
Reminder: Mortgage payment ‘holidays’ extended to the end of October
If you are having trouble affording your buy to let mortgage repayments as a result of your tenant falling into arrears, you should be aware that the original three-month payment ‘holiday’ announced in March was extended for a further three months in June and is now running until the end of October.
If you have already been granted a payment break by your lender, you can ask for it to be extended if necessary. Those who haven’t yet applied now have until 31 October 2020 to do so.
Be aware that interest on the outstanding borrowed amount will continue to accrue and you should clarify with your lender how this additional interest and the ‘holiday’ months will be reallocated. Some lenders will extend the length of the mortgage by the number of months; others will keep the term as it is and simply increase the monthly repayments to account for the extra interest accrued. Either way, it’s important to understand that taking this payment holiday will ultimately increase the overall cost of your mortgage borrowing.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
Embrace Financial Services usually charges a fee for mortgage advice. The amount of the fee will depend upon your circumstances and will be discussed and agreed with you at the earliest opportunity.