Buy-to-let mortgages disappear as banks cull their cheapest deals

Landlords have been left scrambling for mortgages as lenders have pulled buyto-let deals from the market as interest rates soar.

The number of available buy- tolet deals has plunged by a third since June as lenders withdrew 1,100 deals in two months, according to data from Moneyfacts, an analyst. In July alone, the number of available mortgages fell by 14pc.

Experts warned that banks are ditching their best buy-to-let deals as rising interest rates squeeze their margins.

Jeni Browne of Mortgages for Business, a buy-to-let broker, warned that lenders were scrapping their least profitable deals – those which are best for consumers – as interest rate rises increase their costs. “They are trying to preserve their margins, and that means trimming buy-to-let mortgages that are less profitable,” Ms Browne said.

The Bank of England announced its sixth consecutive decision to raise the Bank Rate on Thursday, to 1.75pc. It had already jumped from 0.1pc in December to 1.25pc.

Rates on buy-to-let deals have rocketed in recent weeks. On August 1, the average rate on a five-year fixed-rate buy-to-let mortgage (across all deposit sizes) was 4.49pc, according to Moneyfacts. This was a jump of 1.33 percentage points from the 3.16pc average rate at the start of February – an increase of 42pc in six months.

Rates on two-year fixes jumped from 2.9pc to 4.04pc across the same period – a 33pc increase.

As of August 1, there were 2,375 buyto-let mortgage deals available, compared to 3,484 at the start of February.

There are early signs that the shrinking availability of good deals is eroding landlord demand, on top of the other challenges faced by investors. Until recently, record rent growth has brought landlords racing to buy despite the interest rate rises. Analysis by Nationwide Building Society showed that buy-to-let mortgage transactions in May were at their highest level since November 2021.

But James Tucker of Twenty7tec, a mortgage website, said demand from property investors is now in decline. “Buy-to-let mortgage searches in July were static compared to June, but down around 10pc compared to the highs in March,” he said.

By the end of July, volume of ESIS documents – information sheets that are a lead indicator for offers – being produced by advisers was down by 20pc compared to the year’s daily highs, Mr Tucker said.

Ms Browne said that because lenders are ditching their least profitable deals, so- called “green” mortgages, whereby borrowers can get better rates for buying more energy efficient properties, are disappearing at a particularly fast rate.

Data from Mortgages for Business show that between May and July alone, the number of green deals for limited company borrowers fell by 42pc.