New investors hoping to get into the buy to let market and existing landlords looking to extend their portfolio will find it harder to get funding following news that five more lenders have joined a growing list of institutions unwilling to offer products for this type of investment in the current climate.
Last year there were more than 3,600 buy to let mortgage products but this figure has now dramatically been reduced to around 600 as the credit crunch begins to bite.
Before the credit crunch raised fears of a downturn in the UK economy, landlords were able to get 90 percent buy to let mortgage but these rapidly disappeared. Now loans offering up to 85 percent of property value are going the same way.
The withdrawals were announced in the same week that the government revealed a plan to unblock the flow of credit between banks by issuing bonds to encourage them to start lending to each other again.
Exact details are yet to be announced, but broadly The Bank of England will grant Government bonds in exchange for securities backed by UK mortgages.
Critics say it looks as if the government is once again bailing out the banks with public money and that there is a real danger the tax payer could end up footing the bill.
But the Bank of England say tax payer’s money will not be at risk.
It is understood Mervyn King, the Governor of the Bank of England, has been working on the plan for more than a month.
Financial analysts warn that he must tread carefully as the move is being made fairly soon after the Northern Rock crisis which forced the government to us billions of pounds of public money to put together a rescue plan before nationalising the bank.
