The mortgage crisis spreads with the disappearance of rental loans

Lenders have been making massive withdrawals from mortgage transactions in recent weeks, triggered by fears of interest rate hikes much higher than expected, making fixed rate mortgages very difficult to price. Affordability tests have also become tougher, with some lenders asking homeowners to prove they can afford rates of 8.49%, experts said.

Short-term solutions are the most difficult for lenders to assess, as forecasters expect interest rates to rise sharply in the coming months, before peaking in mid-2023.

Jeni Brown of Mortgages for Business said that while the number of buy-to-let agreements has halved since the September 23 mini-budget, the number of fixed-rate buy-to-let agreements has fallen. by about 70%.

“There’s no doubt that it’s more difficult to get a fixed rate mortgage right now. Lenders are sheltering themselves from the economic tsunami that followed the mini-budget,” Ms Brown said.

Homeowners buying into a limited liability company — a tax-advantaged structure that allows investors to offset their mortgage interest payments against their tax bills, unlike those buying in their own name — now have 165 options, according to Mortgages for Business.

Of these, 110 were fixed rate. The vast majority – 95 – were five-year patches.

Owners buying as individuals had 329 offers in total, of which 254 were fixed.

On June 1, there were 3,484 buy-to-let mortgage transactions in the market, according to Moneyfacts, a data provider. As of September 29, that number had dropped 75% to just 862. This week the number is back to 1,057, but that’s still a 70% drop from the summer.

As lenders slowly restart transactions, prices are rising. Over the same period, the average rate nearly doubled, from 3.32% to 6.4%, according to Property Master, another buy-to-let broker.

The cheapest buy-to-let deal available is now at 3.29pc, according to Property Master. That was more than three times last year’s low, which charged 0.99pc.

Not only are transactions getting more expensive, lender affordability tests are getting tougher. Angus Stewart of Property Master said: ‘The primary route lenders use to restrict and manage their borrowing is through stress rating changes. Some lenders are now testing that homeowners can afford to make payments at 8.49%, he said.