'Tougher to secure buy-to-let mortgages'

Nine out of 10 landlords are finding it harder to get a mortgage than they did earlier in the year despite improvements to the wider lending market, research showed today.

Around 89 per cent of investors who tried to take out a mortgage on a buy-to-let property during the three months to the end of August said it was more difficult to get finance than during the previous three months.

Only 3per cent of landlords said they had found it easier to get a mortgage, while 8 per cent said they had not noticed a change, according to specialist lender Paragon Mortgages.

The buy-to-let mortgage market has been hit hard by the credit crunch as it relies heavily on the wholesale money markets to raise money to fund lending, but these markets have effectively dried up.

The number of different mortgages available on buy-to-let properties has dived by 94 per cent since August 2007, when the credit crunch first struck, to just 196 now.

But while there are signs that conditions may be improving in the wider mortgage market, the availability of buy-to-let mortgages has continued to fall in recent months, dropping from 218 in May.

John Heron, Paragon Mortgages' managing director, said: "Product availability in the general mortgage market has improved slightly in recent months, but has worsened for the buy-to-let market.

"Mainstream lenders are reducing their focus on this sector and specialist lenders are still unable to access the wholesale funding markets to enable them to offer new products.

"We know that there is demand from investors to purchase new property, particularly with returns from savings products being so low, but they are being frustrated by a lack of mortgage supply."

He said buy-to-let lending levels had slumped, and warned that there was a real danger the private rented sector could start to contract, particularly if so-called accidental landlords began to sell their homes now that the housing market was picking up.

He said: "This would be disastrous for those sectors of the population that rely on the private rented sector for their housing needs.

"The Government has already taken steps to increase liquidity in the lending markets but these have had limited success. It is imperative that more steps are taken to improve confidence in and access to the wholesale funding markets."