Tens of thousands of landlords will struggle to remortgage in the next few months as their two-year fixed rate deals come to an end.
The usually high number of landlords coming to the end of the two-year initial deal follows a spike in property investors snapping up mortgages in March 2016.
At that time, landlords raced to buy in a bid to avoid the 3 per cent surcharge being introduced on all new buy-to-let and second home purchases from April that year.
As their attractive initial deals come to an end, these landlords will need to refinance to avoid automatically slipping onto their lenders’ so-called standard variable rate – which tends to be significantly higher and could see monthly payments spiral
However, many will struggle to remortgage in what is now being referred to as the ‘remortgaging crunch’.
This is where new tighter lending criteria applied to buy-to-let mortgages is preventing landlords from securing a new deal, according to Ray Boulger, of mortgage brokers John Charcol.
He explained: ‘There is now much stricter mortgage regulation in place than two years ago. If you borrowed close to the maximum loan-to-value two years ago, then you are going to face much stricter lending criteria, which includes greater affordability tests.
‘In a lot of cases, landlords won’t be able to remortgage, but they will be able to do a product transfer with their existing lender. It means their options will be limited.’
He suggested that many of the landlords who bought new properties in March 2016 and rushed to beat the deadline will have taken out popular two-year fixed rate deals.
He went on to say that a lack of readily available finance for these landlords could expedite their decision to quit buy-to-let.
‘It is unlikely that the…