From mortgage payment holidays and the shutdown of the market in March to the temporary stamp duty cut in July, it's been a head-spinning year for property investors.
Landlords looking to remortgage or invest have been faced with significantly fewer mortgage options, with a third of deals disappearing from the market.
Here, Which? explains what's happened to buy-to-let mortgages since the outbreak of COVID-19 and speak to experts about how the future might look for landlords.
Landlords have seen the number of mortgages available increase significantly since the property market reopened in May, but options remain scarce compared with before the pandemic.
Borrowers with the smallest deposits have suffered the biggest cuts, with the vast majority of 80% mortgages and all 85% deals being withdrawn.
Landlords borrowing at 60 to 70% loan-to-value (LTV) have largely been shielded from the worst of the cuts, as shown in the table below.
|Loan-to-value (LTV)||Number of deals (March 2020)||Number of deals (October 2020)||Change|
Source: Moneyfacts. Fixed-rate mortgages only. Data from 2 March 2020 & 16 October 2020.
Less choice isn't always bad news for borrowers, and buy-to-let mortgage costs have only increased slightly since the lockdown.
Right now, the average rate on a two-year fixed-rate deal is 3.1%, compared with 2.9% at the start of March. On five-year deals, the rise has been smaller still, from 3.39% to 3.56%.
|Type of mortgage||Average rate (March 2020)||Average rate (October 2020)||Change|
When we look at the cheapest rates on the market, the struggles for landlords with smaller deposits become clearer.
The chart below shows how the best initial rates on two-year fixes have changed since March.
As you can see, rates have risen slightly on 70% mortgages and quite significantly on 80% deals, but remain unchanged at other LTV levels. We can't compare 85% deals as there are no deals currently available.
The figures above show how mortgage options have fallen this year, but they don't fully reflect how the market has come back to life since the doldrums of the spring.
We spoke to two buy-to-let mortgage experts to find out more about the current state of the market for landlords and ask what might be next for buy-to-let.
Eleanor Williams, finance expert at Moneyfacts, told Which?: 'There are indications that landlords may have cause for positivity. We've seen mortgage choice steadily increasing each month and landlords potentially have an opportunity to benefit from the stamp duty holiday'.
Richard Rowntree, managing director of mortgages at the buy-to-let lender Paragon, says: 'The buy-to-let market is playing a starring role in the property market bouncing back. This is supported by the increasing availability of buy-to-let mortgages, with 370 more products now on offer compared with May.'
Buy-to-let headlines are often about landlords leaving the market, but the current stamp duty cut offers an avenue for some investors to expand their portfolios. So too does changing attitudes to property since the start of the pandemic.
Eleanor Williams says: 'Holiday let mortgages have been in demand lately, with changing guidelines on travelling abroad leading to a rise in the popularity of staycations.
'With continuing uncertainty and a scarcity of low-deposit mortgages, there may be increased demand for rental properties, which landlords in a position to capitalise may wish to consider.'
Richard Rowntree says: 'A number of factors are driving the market. Pent-up demand following the lockdown has resulted in some people seeking homes with more outdoor space, while others are looking for properties that might be cheaper or in more attractive areas as their need to commute has been reduced.
'The return of students to universities is also a key driver. Earlier fears that students would be deterred from campus life seem to be in the main unfounded. In addition, the A-level grading U-turn meant more students gained the qualifications necessary to secure a place.
'All of this demand is being supported by the stamp duty break. The average saving of around £4,500 is stimulating the market, with many landlords updating their portfolios by investing in properties that require renovation.'
Richard Rowntree says: 'The stamp duty deadline is fast approaching and there are reports of backlogs in Land Registry, local government and conveyancing due to the extra demand the scheme has generated.
'Add the potential impact of a second wave of COVID-19 and the evictions we may see as unemployment increases, and we are set to experience a period of significant change in the second quarter of next year.
'Professional landlords will be better placed to absorb any losses into their portfolios, but we could see smaller scale amateur landlords continue to exit the sector.'
Eleanor Williams says: 'Landlords interested in refinancing or adding properties to their portfolio should ensure they thoroughly research and plan ahead in order to protect their investments.
'In these times, seeking advice and support from independent, qualified advisers could be invaluable in navigating their choices'.