The buy-to-let (BTL) is set to become a loan-to-value (LTV) only market for purchase acquisition, according to SimplyBiz Mortgages head of strategic development Richard Merrett.

Speaking on this week’s Lenders Live, Merrett said: “What’s quite interesting is that you’ve got lots of lenders starting to come back into the market and there are some big swings on the stress rates that are being used among lenders that are in the same peer group as well.”

Merrett’s comments come after The Mortgage Works put their stress rate up to 8.49% last week following significant changes in BTL interest rates and the wider economy. 

The Mortgage Works said that the change is “an interim measure to better protect landlord cashflows during a period of interest rate turbulence”. 

Knowledge Bank’s chief executive and founder Nicola Firth said this coupled with the increase in two- and five-year fixed rates, suggests “no new business above 50% LTV is going to get placed as the numbers simply don’t add up”.

Merrett explained: “I’ve seen high street lenders come out with anything between 6.5% to 8.5% as their stress. It’s all over the place and lenders are responding and reacting to a number of different variables, pricing volumes, and everything in that.”

He also noted the impact on those lenders that are capital market funded and suggested “there’s going to be some real challenges for them as we saw over the Covid period, and there’s many of them who were only just adapting and recovering and being able to return to the market in that space”.

Meanwhile, Fleet Mortgages chief commercial officer Steve Cox stated that moving away from the very low interest rate environment into a “more historically normal” setting is a “significant change”.

Cox said confidence is important because “if we can see a bit more of a stable environment, then we may start seeing funding costs start to come off the heat a little bit, which will help”.

He explained that moving into the more “historically normal” environment will start to have an impact on the affordability calculator.

“From a point of view of where the market has been going, it has been moving towards professional landlords with larger portfolios so it may be that they can continue to build if they have built significant equity positions in their portfolios over time but I’m not sure how long all this will go on for.”

“It goes back to the point around stability and if we see this then a more normal operating environment might start to feed through,” Cox added.