Both consumers and lenders have been adversely affected by the global credit crunch since it swept across the nation last summer. Lenders have found it increasingly difficult and expensive to secure finance on the wholesale money markets to fund their mortgage lending activities, and as such have had to slash the number of mortgage products available by two thirds in the space of a year, increase interest rates on mortgages, hike up arrangement fees on mortgages, raise deposit levels on mortgage loans, and restrict access to many mortgage products.

This has made it difficult for many consumers to get mortgage finance from lenders at an affordable rate, and has severely affected the housing market, where prices have been plummeting for ten straight months. However, it is not only the traditional property purchaser that has been suffering as a result of the current conditions in the mortgage and housing sectors. Officials have said that buy to let investors have also been hard hit by the current conditions.

Figures from lenders in the UK have shown that the demand for buy to let mortgages has been falling in the first half of this year, with an 18% drop in buy to let mortgage loans for the first half of the year compared to the final half of last year. This was also the first fall in buy to let mortgage loans for three years, with just 144,600 new buy to let loans being taken out in the first six months of the year.

Officials from the Council of Mortgage Lenders said that it was unlikely that rents would fall because the demand for rental properties was still high, with many people who are now unable to get a mortgage to buy their own home looking to rent instead. The level of mortgage loans for traditional property purchasers has fallen by 28% in the first half of this year compared to the final half of last year.

A CML official said: “We expect the rental market to remain underpinned by strong demand, partly because some people who would like to buy a home are being forced to carry on renting for now.”

However, landlords are running into similar problems as other consumers, in that they are finding it harder to get a buy to let mortgage due to tighter credit conditions, and are having to find a larger deposit to put down. Another recent report also suggested that there are now over ten thousand landlords that have fallen three months behind on their mortgage repayments. It went on to suggest that many landlords may decide to try and sell their properties prematurely in the event that they were unable to keep up with mortgage repayments.

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