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Buy-to-let borrowing hit by high house prices and tougher lending criteria

Average buy-to-let loans and deposits increased in 2016, new research from The Mortgage Broker Ltd has revealed.

This came as a result of soaring property prices and the tougher stance taken by lenders on criteria and rental calculations.

The findings reveal that landlords borrowed an average of £15,000 more to buy property in 2016, in comparison to 2015. The average loan rose in 2016 to £185,188, up from £170,268 a year before.


Meanwhile, the average loan to value (LTV) fell from 61.6% in 2015 to 59.7% in 2016, while the average deposit climbed by 18% to stand at £125,016 in 2016.

What’s more, landlords and investors shelled out more for their properties year on year – 12.7% more, in fact. The average property price last year was £310,265, up from £275,286 in 2015.

Gross buy-to-let lending in November was at its highest monthly level since the additional stamp duty surcharge on second homes was implemented last April, according to the Council of Mortgage Lenders (CML). Some £3.2bn was borrowed by landlords in November, up 10% on October but down 9% on a year-by-year basis. 

“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,” Darren Pescod, Managing Director of The Mortgage Broker Ltd, said.

“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.”

He added: “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.”

Pescod does, however, admit that the additional stamp duty charges and income tax changes that have come into force in the last 12 months have caused a slowdown in the sector, with the number of applicants for buy-to-let mortgages going down.

“This may lead to some consolidation with larger landlords, scooping up rental opportunities in their local area and beyond,” he concludes. “Our view is that smaller landlords with fewer than three properties may find it financially tough and will pull out of the market.”


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