13:48 PM, 17th October 2018, About 4 years ago 7
Given the significant changes that have occurred in the buy-to-let (BTL) market in the last few years, not to mention the recent base rate increases, it’s no wonder that many landlords are feeling uncertain about their future. Thankfully, it seems lenders are feeling less nervous, as the average five-year fixed BTL rate has fallen to its lowest level on Moneyfacts.co.uk records this month.
“The BTL market has been on a rollercoaster ride in recent years, with not only two base rate rises to contend with, but multiple regulation and tax changes thrown into the mix,” commented Charlotte Nelson, finance expert at Moneyfacts.co.uk. Considering all of this, it’s rather surprising that rates have fallen, with the long-term fixed rate down by 0.05% on average month-on-month.
|Average five-year fixed BTL rate||3.77%||3.43%||3.55%||3.40%|
At the same time, the number of BTL property purchases has been going down, with UK Finance’s latest Mortgage Trends Update showing an 11.1% decrease in July compared to the previous year. This may be why providers are making their deals more attractive, to try and entice borrowers back into the market, as a result of which competition in the BTL market remains high.
“In the aftermath of August’s base rate rise, many BTL borrowers will be looking to remortgage from their standard variable rates (SVRs), with several of these landlords potentially considering longer-term options to act as a buffer against any future rises,” Charlotte said. “It is this extra business providers are likely wanting to attract.”
The focus on five-year fixed mortgage products would allow landlords to secure their repayments and hopefully ride out any overall rate rises likely to happen in the next few years. Additionally, Charlotte pointed out that “savvy borrowers are aware that the strict stress test applied to two-year deals is not applied to five-year fixed rates,” giving even more reason for competition to focus on the five-year BTL market.
“While it is great news for landlords that the long-term deals are cheaper, borrowers know all too well that with the potential for further base rate rises in the future, these low rates are unlikely to last,” Charlotte concluded. “Therefore, any borrower sitting on their SVR or coming to the end of their term would be wise to consider a new deal now before it’s too late.”
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