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As pent-up demand built up over the recent lockdown is released, Moneyfacts.co.uk has analysed how the buy-to-let mortgage market has changed over the year so far.
Landlords will be pleased to see that the choice of products has improved recently. After dropping to only 1,455 total products offered in May, over the last two months, 283 more products have been added to lenders’ ranges. There are now 134 more two-year fixed products available in the buy-to-let sector than there were at the start of May 2020, and 164 more five-year fixed rate products are on offer. Despite this, the overall market is still far below the levels seen in January (2,583 products available) and March (2,897).
Average rates remain competitive, especially when compared to January of this year. The average rate for two-year fixed rate mortgages on 1 July was 0.21% less than at the start of this year, while the five-year fixed rate has fallen by 0.22% over the same time period.
|Buy-to-let mortgage market analysis|
|BTL product count – fixed and variable rates||2,583||2,897||1,887||1,455||1,738|
|Two-year fixed rates BTL – all LTVs||823||914||610||491||625|
|Two-year fixed rates BTL – 80% LTV||119||141||57||9||31|
|Two-year fixed rates BTL – 60% LTV||126||124||129||148||144|
|Five-year fixed rates BTL – all LTVs||879||1,000||695||480||644|
|Five-year fixed rates BTL – 80% LTV||110||150||69||6||19|
|Five-year fixed rates BTL – 60% LTV||128||133||140||155||146|
|BTL two-year fixed – all LTVs||2.82%||2.77%||2.71%||2.51%||2.61%|
|BTL two-year fixed – 80% LTV||3.64%||3.56%||3.80%||3.61%||3.18%|
|BTL two-year fixed – 60% LTV||1.92%||1.89%||2.24%||2.39%||2.28%|
|BTL five-year fixed – all LTVs||3.19%||3.24%||3.16%||2.94%||2.97%|
|BTL five-year fixed – 80% LTV||4.03%||3.98%||4.18%||4.32%||3.82%|
|BTL five-year fixed – 60% LTV||2.32%||2.31%||2.62%||2.76%||2.65%|
|Data shown is as at first working day of month, unless otherwise stated. Source: Moneyfacts.co.uk|
Eleanor Williams, Finance Expert at Moneyfacts.co.uk, said:
“The shock of the Coronavirus pandemic and its resultant effects has been the latest event to impact the beleaguered buy-to-let mortgage market, following on from a number of changes over recent years that affected stamp duty, interest relief and capital gains tax. The mortgage market as a whole remains an evolving and complicated landscape, as the ongoing impact of the recent lockdown has affected product choice and rates. However, as our latest research shows, the buy-to-let sector has adapted well and there are indications that landlords may have cause for positivity.
“The latest Rental Index research from lettings platform Goodlord* indicates that in June, new tenancy applications remained at 90% above 2019 levels. Subsequently, they have recorded increases in rental costs and also void periods reducing, as tenant demand for new properties remains strong now that the market has reopened. This news should be a boost to landlords, who after a difficult few months can see that choice is beginning to return to their sector.
“The last two months have seen 134 more two-year fixed rate mortgage products and 164 more five-year fixed rate deals become available than were offered at the start of May. It is also positive that even at the higher-risk, 80% loan-to-value (LTV) tier, the number of two-year fixed rate deals has increased by 22 and the number of five-year fixed options in this bracket has gone up by 13 since May.
“The small drop in the number of deals at 60% LTV for two and five-year fixed rate products could be explained by the fact that lenders may have increased any maximum LTV caps that they put in place earlier this year, as the number of products live in the next LTV categories (65%, 70% and 75%) have all increased. This is a further indication of an appetite to lend from providers in this sector.
“There is also cause for positivity when we examine the average rates on offer in the buy-to-let market too. The average two-year and five-year fixed rates have fallen by 0.21% and 0.22% to 2.61% and 2.97% respectively since the start of this year. However, it is worth noting that these same rates are respectively 0.10% and 0.03% higher than at the start of May 2020. This could be the result of the increase in higher LTV products, which usually charge a higher rate, being introduced back into the market and affecting the averages.
“The increase in overall product choice and the fact that average rates remain competitive when compared to where we began this year may be early indications that this sector is starting to recover. Due to continuing economic uncertainty and few low-deposit residential mortgage deals available, there may be increased demand for private rental properties, which those landlords in a position to capitalise on may wish to consider. Those interested in refinancing their existing products or taking on further properties for their portfolio may be wise to seek advice from an independent, qualified adviser, who should be up-to-date on the latest available products and criteria.”
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