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Buy-to-let lenders battle for business

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A multitude of buy-to-let mortgage lenders have cut their rates in an attempt to win business in an increasingly competitive marketplace.

Under normal circumstances, landlords are requested to ensure their rental income exceeds that of their interest only mortgage repayments.

However, as interest rates have risen three times in the last six months, there is less demand for buy-to-let mortgage products as landlords are becoming more cautious about entering the market.

The result has been a bidding war between mortgage lenders and many have cut their requirements to 100 per cent of rental income.

Cheltenham & Gloucester, the largest High Street lender, has reduced its requirements from 125 per cent to 100 per cent, Mortgage Works has dropped from 120 per cent to 100 per cent and the Bank of Ireland along with Bristol and West have also cut costs from 115 per cent to 100 per cent on three and five year fixed-rate deals, reports Reuters.

Despite many lenders' panic, John Heron, managing director of Paragon Mortgages told the news agency that landlords themselves should be able to cope with the climate of rising interest rates.

"Over the last four years, landlords' loan to portfolio value ratios have been generally declining, showing that on the whole, buy-to-let now has a lower risk profile than it did in 2003, he said.

"Landlords will be able to take the increased cost of borrowing in their stride."

Buy-to-let is therefore still a healthy long-term option for savvy investors interested in ploughing their cash into the housing market.

Annual house price inflation reached 7.8 per cent in December, according to official figures from the Land Registry announced today, meaning that landlords are currently benefiting from increased capital appreciation as well as cheaper mortgage deals.

But these gains in property prices were not spread equally across the country.

London led the field with house price inflation reaching 10.4 per cent but property owners in the north-east saw markedly less appreciation of the value of their assets of just 4.5 per cent.

The typical house in the UK is now expected to cost £173,171 as demand continues to outpace the supply of new homes.

In the long term, it appears that the property market is in good health – last year saw prices rise faster than the three previous.

Ed Stansfield of Capital Economics told the Press Association: "Today's figures are no great surprise. It does not give much support for signs of a slow down in the market."

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