Small lenders pull buy-to-let ranges amidst rising rates

A series of specialist lenders have removed their buy-to-let product ranges – as landlords rushed to lock onto cheaper mortgage rates.

Dudley Building Society, State Bank of India, Al Rayan Bank have pulled their buy-to-let ranges according to The Telegraph – presumably to manage the flow of applications that came their way.

Meanwhile Harpenden and Bath building societies have withdrawn most of their landlord mortgages, while Cambridge Building Society has stopped distributing buy-to-let mortgages through the broker channel.

While this may be the result of a market dealing with the transitional effects of rising interest rates, these players likely account for less than 1% of the market, according to Ray Boulger, senior technical manager of broker John Charcol.

Boulger said: “All of those lenders are small players, so in terms of availability of mortgages I don’t think it’s a big deal.

“Some lenders are struggling to process applications – either they withdraw temporarily or raise rates so they become uncompetitive.

“We’ve seen a huge rise in gilt yields, by 1% over the last year. Lenders are chasing their tails in terms of raising rates.”

Harpenden Building Society is one lender that will be a missed according to Boulger, because it’s especially flexible when it comes to lending to expats.

However he reckons it will only be a few weeks until the likes of Harpenden returns.

Typical buy-to-let mortgage rates have risen from 2.9% in December 2021 to 4.04% by August, while these increases could continue.

Boulger reckons the Bank rate will increase by 0.5% again on 15 September, which would see them climb to 2.25%.

This is due to aggressive behaviours from the US Federal Reserve, rising gilt yields, as well as spiralling inflation.

Boulger added: “The short-term outlook in bank rates is worse than we thought a month ago.

“The faster that rates go up the more it’s going to impact house prices. I think we’re going to see prices fall over the next few months.”

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