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Moneyfacts.co.uk highlights a growth in choice of Buy-to-Let (BTL) product options, but warns that interest rates are on the rise.
For the fifth consecutive month, BTL availability has continued to improve; with 2,333 products available, the sector has recovered to 81% of pre-pandemic levels (compared to 68% recovery in the residential sector) and now offers the highest number of products seen since last March, providing landlords with a greater level of choice.
The average two-year fixed rate is 0.28% higher year-on-year, and at 3.05% is the highest recorded since June 2019 (also 3.05%). The five-year equivalent at 3.41% is up 0.17% compared to a year ago and is currently the highest since September of 2019, when it reached 3.44%. Month-on-month, the only borrowing tiers where rates have fallen since February are at 60% loan-to-value (LTV), which may be good news for those with sufficient equity or deposit.
The proportion of the fixed rate BTL sector in which fee-free deals are offered or incentives such as free valuations or free legal fees are available has also reduced year-on-year – indicating that landlords may have to search a little harder for deals with the right incentive package for them. Surprisingly though, at a time when providers and landlords alike may be tightening their belts, the proportion of the market where cashback is available has risen to 25%, a 4% improvement on last year.
|Buy-to-let mortgage market analysis|
|BTL product count – fixed and variable rates||2,897||2,100||2,333|
|BTL two-year fixed – all LTVs||2.77%||2.97%||3.05%|
|BTL two-year fixed – 80% LTV||3.56%||3.97%||4.14%|
|BTL two-year fixed – 60% LTV||1.89%||2.52%||2.14%|
|BTL five-year fixed – all LTVs||3.24%||3.32%||3.41%|
|BTL five-year fixed – 80% LTV||3.98%||4.11%||4.29%|
|BTL five-year fixed – 60% LTV||2.31%||2.79%||2.52%|
|Buy-to-let fixed mortgage market analysis|
|Deals with no product fee||475 (19%)||254 (14%)||301 (15%)|
|Deals with free/refunded legal fees||840 (34%)||614 (34%)||614 (30%)|
|Deals with a free/refunded valuation||1352 (55%)||774 (43%)||789 (39%)|
|Deals with cashback||531 (21%)||307 (17%)||503 (25%)|
|Data shown is as at first working day of month, unless otherwise stated. The % shown is the proportion of deals out of the fixed mortgage market. Source: Moneyfacts.co.uk|
Eleanor Williams, Finance Expert at Moneyfacts.co.uk, said:
“There is no doubt that the impact of the pandemic has been polarising, with the BTL sector not escaping from this trend. There may therefore be landlords whose focus will be on cutting costs and increasing margins where possible, perhaps by refinancing their existing BTL mortgages. Equally, there may be some who are now in the fortunate position of being able to consider investing in a rental property for the first time.
“According to the Hamptons Letting Index, half of landlords reletting their property last year were able to increase the rent charged, perhaps fuelled by the fact that significantly fewer properties came onto the rental market last year; both factors that may fuel some of the optimism this resilient sector has shown. It is therefore inherently positive to see further recovery in the number of available products, rising by 233 deals this month to 2,333 – the highest recorded since this time last year.
“As the level of product choice has returned, rates have also continued to climb, with both the average two and five-year fixed rates for all LTVs higher than the same rates year-on-year. The only LTV tier where average fixed rates did not increase this month was at 60% LTV, where both the two and five-year average fixed rates fell by 0.38% and 0.27% respectively, which may be good news for those with 40% equity or deposit. It is important to note though that these are averages, and therefore while representative of the market as a whole, there are some very competitively priced products available, with some – depending on LTV and criteria – available at below 2%. Therefore, those who are hoping to refinance or take on a new deal would do well to shop around.
“Those who are looking for a new BTL mortgage may have to dig a little deeper than they have in the past to find a fee-free product or one with incentives such as free legal fees or a free valuation, as the percentage of the market that offer these incentives has shrunk year-on-year – perhaps unsurprising to see when providers have had to rein back lucrative perks. Although interestingly, the proportion of the market where cashback is available has increased, not only year-on-year, but by 8% over the last month. The support and advice of an independent adviser or broker could therefore be invaluable in clarifying a prospective landlord’s priorities and helping to narrow down the search for the best deal for their unique circumstances.”
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