Banks pull landlord mortgages after rush for cheaper deals

BANKS have stopped offering buy-tolet mortgages after landlords rushed to lock in cheaper rates and overloaded their systems.

Seven lenders have temporarily pulled all of their mortgages for landlords or heavily restricted new offers.

Since the end of last month Habito, Al Rayan Bank, Dudley Building Society and State Bank of India have withdrawn all of their buy-to-let mortgages.

Harpenden Building Society and Bath Building Society have withdrawn the majority of their landlord mortgages while Cambridge Building Society has stopped selling buy-to-let deals through brokers.

Some of the lenders pulled the deals alongside residential mortgages as their systems struggled to cope with demand from borrowers rushing to lock in deals before rates rise.

The average two-year fixed-rate buyto-let mortgage deal charged 2.9pc before interest rates began rising in December, according to analysts at Moneyfacts. By the beginning of August, this had climbed to 4.04pc. Meanwhile, the average five-year fixed rate deal has risen from 3.18pc to 4.49pc in the same period – adding hundreds of pounds to annual interest payments, which in many cases will be passed on to tenants in the form of higher rent.

Dudley Building Society, Al Rayan Bank, Habito, Bath Building Society and State Bank of India all said the withdrawal of buy-to-let deals was temporary as they managed high levels of demand from borrowers.

A spokesman for Bath said its mortgages had been re-priced and would return in the first week of September.

Cambridge Building Society and Harpenden Building Society did not respond to requests for comment.