The number of buy-to-let remortgaging deals has fallen by more than 40% since the beginning of March, but some landlords will be much harder hit than others.
Landlords looking to switch to a cheaper mortgage amid the coronavirus outbreak will find that their options and the rates they’re offered will vary significantly depending on their required loan-to-value (LTV) ratio.
Those borrowing a high proportion of their property’s value are facing the greatest challenge, with no deals left at 85% LTV, according to Which? analysis of Moneyfacts data.
Here, we explain how to refinance your portfolio, what rates you can expect, and your options if you’re borrowing at a high LTV level.
Why are there fewer buy-to-let mortgage deals?
It’s been a tumultuous time for the mortgage market since March, with three big changes resulting in the number of deals dropping dramatically.
First of all, the Bank of England base rate, which governs the cost of borrowing for lenders, fell twice.
Then, the government introduced mortgage payment holidays for homeowners and landlords. As of 28 April, more than 1.6 million households had applied for one, resulting in a significant strain on bank resources.
Finally, the government’s stay-at-home measures have made it impossible to carry out in-person mortgage valuations, resulting in some lenders reassessing their ranges and pulling their higher-risk deals.
Buy-to-let remortgages drop by 41%
In a little less than two months, the number of buy-to-let remortgaging deals has fallen by 41%, as shown in the table below.
| All buy-to-let remortgage deals | Fixed-rate buy-to-let remortgage deals | Two-year fixes | Five-year fixes | |
| 3 March | 1,862 | 1,695 | 788 | 907 |
| 28 April | 1,094 | 998 | 391 | 491 |
| Change | -41% | -41% | -50% | -46% |
Source: Moneyfacts, 28 April.
Can I still remortgage?
As you can see above, there are still more than 1,000 products out there, so there’s plenty of opportunity to switch if you’re coming to the end of your fixed term.
For many borrowers, it will almost be business as usual, but there are some challenges for landlords borrowing at high LTVs.
We’ve crunched data from Moneyfacts and found that the number of deals at 75% LTV or above has fallen most significantly, with 80% and 85% LTV mortgages the biggest casualties.
As the table below shows, the number of deals at 75% LTV has more than halved, but at 80% it has dropped from 279 to just 42.
Borrowers at 85% LTV had always been limited to a handful of lenders and deals, but now there are no options at all.
| 75% LTV | 80% LTV | 85% LTV | |
| 3 March | 721 | 279 | 26 |
| 28 April | 336 | 42 | 0 |
| Change | -53% | -85% | -100% |
Best rates on buy-to-let remortgages
Average rates on buy-to-let mortgages dropped slightly from 3% to 2.97% between March and April, but this is a market where deals vary hugely depending on the size of your equity.
The interactive chart below shows the best rates that were on offer at the beginning of March (the red bar), compared with what’s available now (the blue bar).
As you can see, at 65% and 75% LTV there’s been little change in the cheapest rates, with introductory rates of below 2% available on both two-year and five-year fixes.
At 80%, far fewer deals means much higher rates. On a two-year fix, the cheapest mortgage has increased by 0.5%, but on a five-year fix it’s risen by 1.15%.
Will lenders return to the market?
Research by the broker Mortgages for Business found that lenders are beginning to return to the buy-to-let market, which could mean more deals becoming available soon.
It says four lenders that initially withdrew their buy-to-let deals – Clydesdale, Kent Reliance, Precise and Santander – have now returned, and Saffron Building Society has said it will follow suit later this year.
The likes of HSBC, Foundation, Vida, Platform and Together are all yet to return.
Mortgages for Business says there are currently 42 active buy-to-let lenders, compared with 49 at the start of 2020.
‘Desktop’ valuations could help landlords
As we mentioned earlier, the inability to carry out in-person mortgage valuations is one of the reasons the brakes have been put on the market, but lenders are increasingly finding ways around this.
Some landlords with more straightforward remortgaging cases may find that their lender is willing to process their application based on a ‘desktop’ valuation.
And these may become more common. Earlier this week, The Mortgage Lender announced it would offer desktop valuations on buy-to-let deals up to 75% loan-to-value. Shawbrook, Kent Reliance and Paragon have already adopted similar systems.
Landlords borrowing at higher LTV levels or those with more complicated portfolios (such as Houses in Multiple Occupation) may find they can arrange a mortgage in principle with a lender and then have an in-person valuation undertaken at the very end of the process, after the lockdown rules are relaxed.
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