Buy to let mortgages are scarcer

Getting buy to let mortgage finance is becoming harder as mainstream lenders reduce their focus on this market and specialist buy to let lenders struggle to access wholesale funding.

According to Paragon’s Trends research, 90% of those landlords who have tried to find buy to let mortgage finance in the 3 months to end August, have found it more difficult to secure than in the previous 3 months.

Whilst mortgage availability in the residential market has slightly improved recently, the availability of buy to let mortgage products has continued to fall.

At the end of August there were less than 200 buy to let mortgage products available – down a staggering 94% compared with August 2007.

As an example, Lloyds Banking Group has halved the amount it lends to landlords.

John Heron, paragon Mortgages’ managing director, commented ‘We know that there is demand for investors to purchase new property, particularly with returns from savings products being so low, but they are being frustrated by a lack of mortgage supply.

Buy to let lending has slumped and there is a real danger that the private rented sector could start to contract, particularly if the ‘accidental landlord’ begins to sell property.

This would be disasterous for those sectors of the population that rely on the private rented sector for their housing needs.’

If you are already a landlord or about to become one, don’t get carried away with the mortgage and forget about landlords insurance.

This is important whether you own one or many properties and can cover various risks that arise as a result of owning and renting property – including major risks such as fire or flood, landlord liability cover and tenant default.

The issue of tenant default is one of growing concern with more and more people becoming unemployed. According to the National Association of Estate Agents around 37% of tenants are behind with their rent.