Buy-To-Let Gets Busted!

The collapse of Britain's biggest buy-to-let mortgage lender spells bad news for landlords....

An English tourist was sightseeing in Ireland. The guide pointed out the Devil's Gap, the Devil's Peak, and the Devil's Leap to him.

"Pat," said the tourist, "the devil seems to have a great deal of property in this district!"

"He has, sir," replied the guide, "but, sure, he's like all the landlords-he lives in England!"

Laugh now, or forever be silent - because soon, jokes like this one could be consigned to the past, another victim of the credit crunch.

The British obsession with buy-to-let property finally looks to be coming to an abrupt, rather expensive end.

The collapse this week of Britain's largest buy-to-let mortgage lender, Bradford & Bingley, has got other buy-to-let lenders running scared - to the extent that some have stopped lending altogether.

UCB Home Loans and The Mortgage Works - a subsidiary of Nationwide - this week pulled their entire product range.

Others, such as the now-biggest lender Birmingham Midshires, have increased their rates by 0.5% or more and cut the number of deals they offer by 50%.

In total, there are 25% fewer buy-to-let deals available in the market today (Tuesday) than there were yesterday, according to Fool partner Moneyfacts. And there are 85% fewer deals around now than there were a year ago.

And this situation only looks set to get worse. With fewer lenders offering fewer deals, competition will dwindle, meaning rates will continue to increase. Those lenders which are offering decent deals may find themselves overwhelmed with demand, to the extent that they have to close their doors.

So if you're planning to remortgage any time soon, today is the day to do it - delay now and you could end up paying a lot more later.

Poor, poor, poor landlords!

Do I feel sorry for the buy-to-let landlords who are suffering right now?

Not really, I must admit.

As a first-time buyer who struggled hard to get on the property ladder while buy-to-let landlords raked in the cash, I find it hard to feel much sympathy for the investors who over-leveraged or those who saw buy-to-let as a way to `get rich quick'.

Prudent landlords, who invested for the long-term and took a cautious approach to borrowing, should, I think, be able to survive relatively unscathed - as those with large amounts of equity can still access decent deals.

The rest are likely to have to top up their rental income out of their own pocket to meet their rising buy-to-let mortgage costs.

In other words, it looks like the buy-to-let boom is now officially over.

PS. Check out our podcast from earlier this year with me, David Kuo and Bradford & Bingley head of buy-to-let Jeremy Law. Listen out for the bit when David asks: "Do you see going after the buy-to-let mortgage market as a risk?" and Jeremy answers "No, not at all."

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