Interest-only buy to let mortgage deals may be crucial to market growth.
The buy to let mortgage market is flourishing while the interest only mortgage market is being actively encouraged to fade away.
While new interest only deals could become a thing of the past, existing deals still make up a good proportion of the UK market. Council of Mortgage Lenders figures reveal a massive 35% of the 11.3 million outstanding UK mortgages are interest-only, however lenders are starting to pull back from this form of lending.
Back in February as the FSA put forward proposals to limit riskier lending, UK lenders started to tighten their interest only mortgage criteria. The Co-operative are the latest to introduce changes by withdrawing from the interest only market completely.
Most lenders have brought in various restrictions by increasing deposit levels, limiting what is considered as an acceptable repayment vehicle and preventing first time buyers from accessing such deals.
In the current climate managing risk is becoming an major factor in lenders actions. However property investors are hoping that lenders do not start to approach interest only buy to let mortgage deals in the same way.
Unlike interest only mortgages for owner occupiers, property investors advise that buy to let is a business transaction for the purpose of investment. The investment can generally only be realised in the long-term and most probably through the sale of the mortgaged property.
Also lender risk is not as great with buy to let. In addition to property value landlords have rental and personal income to provide an additional layer of security for lenders.
It is crucial that lenders continue to view interest only buy to let mortgage deals as a business investment and continue to offer such deals to landlords. Buy to let is currently playing a crucial role in the health of the property market. It is considered vital by many property investors that interest only products remain on offer.
Contact Deal Direct for a competitive buy to let mortgage quote.
