“With yields being so low down here, a lot are feeling the pinch on rates increasing to 4s and 5s. Combine that with stress tests and you're in a situation where it's hard to get 75 per cent loan-to-value.”
Founder of FortyOne Money, Jiten Varsani, noted a landlord client in Harrow, London, receiving a £1,900 per month in rent on a now £1,300 per month mortgage, compared to a £600 per month mortgage before.
“These are some serious drops in rental profits,” Varsani said. “We’re trying to secure rates but it's like shooting a moving target with a blindfold on.”
If more landlords begin to exit the housing market, some have questioned whether the UK could require emergency measures such as a rent cap.
This is because, while relinquishing more properties would allow supply to catch up with demand and level out house prices, if families and profit-driven investors buy up the freed stock then rents will inevitably increase, Private Finance director Chris Sykes explained.
And if a lot of landlords sell up in a short period of time, this could call for “drastic measures” from the government such as similar rent caps to those introduced in Scotland and New York, said Sykes.
“Over a longer period, it would be a steadier flow…It’s really tricky and it does need to be a balanced approach.”
Sykes said this morning he had 70 emails from clients panicking about the exodus of mortgage products from the market. “A lot of people are worried and trying to explore their options when not all the answers are out there.”
Separately to the mortgage market, following the pound’s crash, the foreign exchange market has seen some clients pull out of overseas property purchases due to it costing them thousands more.
“We are seeing clients shocked by the rising cost of their property completions in Europe – if they didn’t fix their exchange rate in advance,” said head of partnerships at A Place in the Sun Currency, Nikil Mahra.
“Clients have been left with the choice of a higher bill – or pulling out of their purchase altogether.”
‘It’s basically a mess’
The safe area is the mainstream mortgage market, according to director of London Money, Martin Stewart.
“Buy-to-let or anything that’s complex is going to suffer greatly.
“My line for a while has been - we need less landlords and more houses. Amateur landlords will be selling up, professional ones with a credit line can step in and pick some of them up. More commodities in the open market will lower house prices.”
Reacting to further product withdrawals today, Stewart added: “It’s always going to be the lenders which fall off the cliff first. It happened in 2008. It’s basically a mess.”