UK house prices buy-to-let mortgages

Buy-to-let mortgages recover with 2,400 products now available

Just like in the wider residential mortgage market, buy-to-let mortgages have seen product numbers dip and rates rise, but the latest data shows a better outlook for landlords.

In the lending space, the higher the level of product choice available, the more competitive the landscape, so high numbers of deals on offer are always a positive sign. It demonstrates confidence among lenders, which in turn gives investors more of a drive to proceed, particularly as rates come down, too.

For landlords seeking buy-to-let mortgages at the moment, particularly those who may have been enjoying low rates on longer-term fixed rate products, borrowing costs are undisputedly higher now. But compared with seven months ago, the state of the market has vastly improved.

The latest research from Moneyfacts has revealed that there are now 2,400 buy-to-let mortgages available from UK lenders for landlords. This is the highest it has been since July last year, when there were 2,746 different products on the shelf to choose from. In October 2022, product numbers were down to just 988.

What’s more, the statistics at the start of March show a month-on-month drop in the average interest rate in the sector, with the average across all fixed-rate terms now back below 6% again after a surge towards the end of last year.

Buy-to-let mortgages mark good recovery

For UK landlords right now, it is particularly imperative to choose the best mortgage product for your property and your circumstances. With borrowing costs seeming unlikely to see any significant falls in the coming months, securing a good deal can make a big difference.

The figures from Moneyfacts looking at the state of the buy-to-let mortgages market at the start of this month show that the best potential interest rates can currently be found on a five-year fixed rate at 60% loan to value (LTV), with the average rate now 5.22%.

Product numbers on these specifics are also higher than they were even pre-pandemic, with 107 deals currently available from lenders for landlords seeking a five-year fixed rate with a 40% deposit. In March 2018, there were 87 such products available.

Landlords looking for a shorter term borrowing option, perhaps to hedge their bets towards rates coming down again or as part of a wider financing plan, the average two-year fixed rate is now 5.81%, down from 5.95% last month.

Those with higher deposits on a two-year fixed rate can expect to see rates of an average 5.39% at 60% LTV, while landlords looking for 75% LTV will achieve an average rate of 5.78% if they take out a mortgage now.

While buy-to-let mortgages have not yet recovered as much as the wider market, lenders are still taking steps to try to entice new business, and more lenders have also been entering the fold in recent months – demonstrating ongoing appetite in the market.

Choosing the right option

Anyone with a fixed rate mortgage expiring this year will be watching the market with baited breath to see whether the Bank of England will raise interest rates again, and whether this will have a knock-on effect across mortgage products and rates.

There is still a high level of confidence in the UK property market, though, spurred on by the huge amount of buyer and tenant demand in the buy-to-let space. Landlords who have been in the market for a long time will have seen interest rates much higher in previous times than they are now.

As Rachel Springall, finance expert at Moneyfacts, points out, there is more to consider than just buy-to-let mortgages when looking into property investment and rental.

“Landlords may be waiting for fixed mortgage rates to come down further or indeed opt for a tracker mortgage to give them more flexibility to eventually switch their deal.

“However, interest rates are only part of the decision-making process when entering a buy-to-let investment. Whether that be for new or existing landlords, it is always wise to seek advice to ensure it is the right time to commit to a deal.”

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