Tougher lending criteria is impacting on BTL sector

Interesting new research from The Mortgage Broker Ltd has revealed that higher property prices and tougher lending criteria led to buy-to-let loans and deposits rising during 2016.

On average, landlords borrowed £15,000 more in order to purchase property in 2016, in comparison to the previous year. The average loan has increased to £185,188 in 2016 from £170,268 in 2015.


The average LTV dropped from 61.6% in 2015 to 59.7% in 2016, with the average deposit rising by 18.5% over the same period. In addition, landlords and investors paid 12.7% for their properties on average year-on-year. Average property prices currently stand at £310,265, in comparison to £275,286 in 2016.

Another report from the Council of Mortgage Lenders found that gross buy-to-let lending in November was at the highest monthly level since the additional stamp duty charges were brought in during April. Buy-to-let landlords borrowed £3.2bn in November 2016, up by 10% month-on-month, but down 9% year-on-year.

Tougher lending criteria is impacting on BTL sector

Tougher lending criteria is impacting on BTL sector

Overcoming Challenges

Darren Pescod, Managing Director of The Mortgage Broker Ltd, observed: ‘Landlords are certainly feeling the pinch, but the raft of tax changes that came into force in 2016 do not appear to have dampened the buy-to-let market. In many towns and cities, landlords have increased their investment in buy-to-let property, despite the financial challenges that have been recently thrown at them by the Government.’[1]

‘Our research shows that landlords are finding larger deposits and increasing their borrowing to secure property. With mortgage interest rates so low and the demand for rental property booming, the market still provides a great investment opportunity,’ he continued.[1]

Concluding, Pescod said: ‘Though the stamp duty additional levy and income tax changes that come into force in this tax year have slowed down this sector it terms of the number of applicants applying for new buy-to let mortgages.  This may lead to some consolidation with larger landlords, scooping up rental opportunities in their local area and beyond.  Our view is that smaller landlords with fewer than three properties may find it financially tough and will pull out of the market.’[1]



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