SHOCK: Buy-to-let loans drop by a third as interest rate hikes bite

Buy-to-let loans fell by more than a third according to analysis of the latest figures from the Financial Conduct Authority.

Conveyancing solicitors Bird & Co says mortgages to property investors dropped 37% in 2022-23.

The firm also found that buy-to-let mortgage arrears doubled to £51 million as interest rates climbed sharply last year.

Other findings include:

• Remortgages jumped 57% in 2022-23, the largest change in the last five years.
• Loans to individuals with poor credit histories decreased by 4% compared with a 9% increase the previous year.
• And single income loans witnessed a 10% decrease in 2022-23.

Homeowners are turning to remortgaging to deal with financial uncertainty, seeking better interest rates and more affordable payment options, Bird & Co says. This trend highlights a cautious approach among homeowners.

The decrease in lending to individuals with impaired credit history and single income households indicates a tightening of lending criteria, pushing certain groups of people further away from homeownership, the firm says.

Lagging behind

Daniel Chard, Partner at Bird & Co, says: “The concerning trend of buy-to-let advances consistently lagging behind the average raises questions about the attractiveness of property investment in current economic circumstances.

These trends could exacerbate difficulties for future borrowers.”

“The surge in remortgages suggests homeowners are cautiously tapping into the benefits of home equity, whether for debt consolidation or to invest further – and they aren’t afraid to switch lenders to get the best deal possible, given the drop in home loan advances,” he says.

“These trends could exacerbate difficulties for future borrowers, as they navigate a process where access to credit becomes increasingly selective, impacting their ability to secure loans and fulfil their property aspirations.”

More on buy-to-let investments