Given the devasting impact of the pandemic on most areas of the economy, it could be assumed that the buy-to-let market has been similarly affected. However, the impact has been surprisingly positive.
The stamp duty holiday, coupled with an increased demand for social housing and a generation of young renters who are unable to buy themselves, has allowed the buy-to-let market to boom in spite of the worldwide financial hardship brought on by the pandemic.
The impact of the pandemic on buy-to-let mortgages
The most significant effects of Covid-19 on the buy-to-let market has been on mortgages: lender service times and mortgage loan to value (LTV) ratios have both taken a hit.
Before the pandemic, landlords could acquire an 85 or even 90 per cent LTV buy-to-let mortgage. Now, personal applicants are offered, at best, 80 per cent LTV whilst limited company applicants must settle for 75 per cent.
The surge in applications due to the stamp duty holiday, coupled with difficulty in carrying out valuations, has also resulted in slower lender service times.
The stamp duty holiday effect
The government introduced a stamp duty holiday in July 2020, which saw the threshold increase from £125,000 to £500,000. This drove the average property price in the UK to over £300,000 and average rents to £1,000, and also resulted in an extremely high volume of applications for buy-to-let mortgages who only had to pay the additional 3% for second homes.
However, research from insurance comparison site Quotezone suggests that the number of people looking to become landlords is at an all-time high. They found that there was a 22 per cent year-on-year increase in searches for landlord insurance by people who have owned their property for less than a year. Also, the research found that only 52 per cent of landlords bought their properties with cash in 2020, which shows that buy-to-let mortgages are both appealing and viable for potential landlords.
The booming property market has provided the opportunity to join the buy-to-let market whilst it’s on the rise, and the pandemic restrictions have also allowed people to save more money than planned, giving them the funds to invest.
If your buy-to-let mortgage application has been successful
Landlords who have had their buy-to-let mortgage applications approved must still fulfil the same pre-pandemic requirements before tenants can move in. This includes:
- Choosing an agent to professionally manage your property
- Arrange utilities inspection reports and certificates
- Fit property with safety equipment
- Apply for a landlord license
- Take out landlord insurance
Our independent mortgage advisers are here to help buy-to-let investors secure the best mortgage for their property. Get in touch with our friendly and experienced team today to discuss your buy-to-let mortgage requirements.