Buy-to-let deals disappear

The nationalisation of Bradford & Bingley has sparked a withdrawal of buy-to-let deals from the market, leaving landlords without finance.

Lenders UCB, Bristol and West and The Mortgage Works retracted their buy-to-let (BTL) rates last night, in response to Bradford and Bingley's departure from the market, the removal of three quarters of the BM Solutions' BTL range and the failure of US congress to rescue the state-side financial systems.

Katie Tucker, technical manager for mortgage broker Mortgage Force, said the demise of B&B will cause problems for some as their products offered a particularly generous level of rental cover.

"When big players fall back, others have to follow suit to avoid being swamped by the riskier mortgage applications.

"This leaves little affordable choice for remortgages so thousands of buy-to-let landlords could reach the end of their introductory rates this coming year and find that their rent does not cover the mortgage payments on the lender's standard variable rate (SVR).

"As the landscape is precarious at best, landlords within three months of a remortgage should see a broker immediately," she said.

The market will be hit by the nationalisation of Britain's largest buy-to-let lender as these types of loans will become more expensive, while property values continue to fall.

"I think it will naturally go quite quiet as there will be little consumer hunger for assets that are losing value.

"The huge amount of people who jumped on the buy-to-let bandwagon will be looking to get out."

In the past, buy-to-let lenders required the amount of rent charged every month cover 130 per cent of the mortgage payment. This had dropped to as low as 100 per cent recently, encouraging more people to become landlords and short-term property investors.

However, there is still value in the market over the long-term, Ms Tucker said.

"If there are fewer places for people to rent, rental income will increase, so there will be a market for mortgages again.

"So there will be a slight dip as the last-minute rush of people come out of the buy-to-let mortgage market, then it will regrow as those who are left get the whole share. People will always need to rent."

For those renting from a landlord with a buy-to-let mortgage from B&B, there is no need to panic that you may be on the streets soon.

A spokesperson from the National Landlords Association (NLA) said: "With existing mortgages, it is business as usual. The mortgages have been taken into public ownership, so they aren't going anywhere."

However, the government intends to persuade customers with fixed-rate deals coming to an end to switch banks by putting them on a high SVR, so this could cause problems for those looking to refinance.

The rental market will hold up despite any difficulties in finance, spokesperson Vincenzo Rampulla said.

"This will differentiate the men from the boys. Those who were hoping to make a quick buck will go quickly but rents seem to be holding up in the UK."