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Buy-to-let products are now priced above the psychological 6 per cent mark, a trend that is expected to continue for the foreseeable future. The rise in rates has been accompanied by a sharp reduction in the number of products available.

According to the price comparison website Moneysupermarket there had been a 40 per cent drop in the number of buy-to let mortgages in the first half of 2008.

In addition to hiking rates and cutting the number of products, lenders have reduced maximum loan-to-values to the extent there is little, if anything, on offer at greater than 80 per cent LTV.

On rent cover lenders that were competing with each to see who could go the lowest, with 100 per cent becoming something of a norm last year, are now quoting 125 per cent.

The dramatic market change is particularly telling in new build where most buy-to-let lenders have severely curtailed their involvement in the sector with lower LTVs and, in some cases, blanket boycotts of new-build flats.

Behind all this cautious lending is the desire to limit exposure to what lenders think is a much less secure investment housing market. Talk to them confidentially and many will admit their arrears are up considerably in buy-to-let. One leading buy-to-let lender admitted to me they had risen 200 per cent in recent months. A contributory factor to the rising arrears is many of the larger buy-to-let landlords are self employed and are experiencing trading slowdowns with their own businesses.

This leaves them with less room to channel money into their buy-to-let assets should rental income not pay for the increased costs of servicing a mortgage. Many are on low-rate products that have now reached maturity. Such products were often offered at rates of less than 5 per cent but had relatively short timeframes before reverting to standard variable rates.

At the time of taking them out it was thought it would be relatively easy to remortgage to an equally competitive product to avoid the punitive SVR. That option is no longer available with no buy-to-let products currently able to match such rates and, to make matters worse, lenders have taken every opportunity to keep their SVRs high.

If landlords are lucky to find a suitable product and they meet the tighter criteria, they are finding credit scoring is now more rigorous than it has been in the past. A lender who might have used a pass score of, for example 22, now will be using something closer to 16.

Some are reviewing their credit scoring on a weekly basis to control the flow of applications. Given this backdrop it is easy to cast the banks as the villains of the piece.

However, it would be too easy to blame them. The arrears issue is understandably a worrying one because, as arrears rise, the amount of money that lenders have to put aside to provision for bad debt also rises.

This causes them to further cut back on the amount they have to lend. They have an increasing arrears issue with their existing mortgage book and want to minimise this problem with the new business they write.

So what is the outlook for buy-to-let? Short-term the signs are not good. Undoubtedly there will be a painful readjustment for many in the next 12 months or so.

Some unfortunate landlords, who have borrowed heavily at low rates during the last few years in anticipation of further price rises, are likely to become unstuck.

Mortgages that were affordable at 5 per cent are likely to become unsustainable at 6.5 per cent and above. Auctions will do well, as will acquisitive landlords who have high levels of equity in their existing portfolios.

Longer term, the prognosis is much better. We all know how crowded the UK is and household formation is rising, fuelled by high divorce rates and single-person occupation. The demand for rented accommodation is going to continue to increase through the credit crunch.

While some landlords will be forced out of the sector, there will be many more that will remain in place. They may even grow their portfolios and emerge the other end of the present difficulties with larger and more profitable businesses.

The key for intermediaries is to keep cultivating their buy-to-let clients - even though it may be very difficult to match them with suitable mortgages. They will all benefit from the services of a mortgage adviser when better times return.

Dave Symondson is managing director of Beacon Mortgage Packaging