The Financial Times published an article last week on the fact that buy to let mortgages are consistently bucking the trend of falling interest rates. This is having an adverse affect on people’s ability to jump back into the market.
Even though the price of property has dropped temptingly low some landlords are being forced to shelve their investment plans because of still crippling interest rates in this sector.
The Times quotes figures of 6.3 % on the average two year fixed term by to let mortgage.
This is in stark contrast to the base rate which has fallen from 5.5 to 1.5 in the last twelve months. Couple this with the fact that banks are demanding higher and higher deposits and the buy to let market is really suffering.
The difference is said to be caused by the fact that the banks perceive buy to let mortgages to be a bigger risk than standard mortgages but the net effect is that landlords are unable to afford to invest.
The FT states that agencies are indicating that unless buyers can afford to pay in cash many would struggle to finance a deal.
I can’t help thinking this is maybe a little short sighted of the banks. Surely investment and those that are brave enough to make it in these tough times are part of what is going to drag us out of this recession?
