The introduction of new affordability rules has resulted in a significant reduction in the number of buy-to-let mortgage products available.
Moneyfacts data shows 74 buy-to-let deals have been withdrawn from the market in just one month.
Charlotte Nelson, finance expert at Moneyfacts, said: “The buy-to-let mortgage market took a hit last month, seeing the largest reduction in product numbers since March 2009.
“Usually, the month of December is quiet, with providers gearing up for the holidays.
“This time, however, the buy-to-let market has seen a surge of activity, with the number of buy-to-let products falling back to July 2016’s levels.
“Withdrawals have not been limited to just a few providers, either, with the reductions having been spread across the board.”
|Total number of live BTL products||1,256||1,402||1,482||1,408|
Tougher affordability rules came into play on 1 January.
The new rules reduce the amounts landlords will be able to borrow.
Moneyfacts data showed the 75 per cent loan-to-value sector has seen the largest reduction in product numbers, falling from 606 to 540 in just one month.
Ms Nelson said: “Alongside tougher affordability, major changes to the way in which income from property rentals is taxed will be coming in April.
“Lenders are perhaps withdrawing products to get back to just their ‘core’ range in an attempt to wait and see what other providers will be doing in the run up to April.
“2017 is set to be an uncertain year, which could be a lethal cocktail for landlords, particularly now there are less products on the market. Anyone unsure about their options should seek out a financial adviser.”
Ray Boulger, senior technical manager at John Charcol, said despite a fall in the number of products there is still plenty of choice for buy-to-let investors, with most rates still at, or very close to, their all time lows.
Mr Boulger said: “What is more important to landlords and will have a bigger impact on them is criteria change.
“The new affordability regulations imposed by the FCA from 1 January 2017, plus the income tax changes introduced by (former chancellor) George Osborne, are driving important changes.
“We are seeing an increasing number of products available to special purpose vehicle (SPVs) and furthermore more lenders are retaining the 125 per cent rental cover for SPVs, while increasing it to 145 per cent for personal investors.
“Although the Financial Policy Committee has dictated that lenders must use a minimum rate of 5.5 per cent for their rental cover calculation more lenders are using the exemption which allows them to use pay rate for the calculation for products with a fixed rate of at least five years.
“One result of this is likely to be an increase in the proportion of buy-to-let borrowers choosing a five-year fix, in addition to an extension of the existing trend for a higher proportion of buy-to-let purchases to be made through an SPV.”