Property investors looking to borrow to buy will find a raft of choice from lenders at the moment, with a huge 3,560 buy-to-let mortgage deals currently available.
Confidence within the UK property investment space has been on the rise over recent months, as the housing market has bounced back to growth while interest rates have begun to fall, boosting affordability.
This has coincided with improved rental yields, particularly in certain parts of the UK such as the North of England, which has offset some of the increased borrowing costs seen as a result of higher buy-to-let mortgage rates since 2022.
With the Bank of England base rate now down to 4.50%, down from its recent high of 5.25%, more competition among lenders has led to not only cheaper mortgage rates, but a rise in the number of different products available, including for buy-to-let mortgages.
Although mortgage rates have ticked upwards slightly since January, they remain cheaper than they were a year ago, with more and more lenders releasing new, lower rate deals to the mix. This means property investors can hunt for a deal that suits their circumstances, with a range of incentives and fee-free options available on buy-to-let mortgages to make them more enticing.
Record highs on buy-to-let mortgage options
New research from Moneyfactscompare has revealed that the number of five-year buy-to-let mortgage deals has increased by 92 since last month, while there are now 114 more two-year fixed deals than in January. In total, there are 3,560 products on the market, which is the highest since the company’s records began in November 2011.
It is a significant leap on February 2023’s figures, when there were just 2,246 buy-to-let mortgage options in total.
However, the number of high-deposit options has actually decreased during that time, from 90 two years ago to 74 today on two-year fixed rate deals at 60% loan-to-value (LTV), which could indicate a lower appetite among landlords for lower LTVs. Five-year rates at 60% LTV experienced the same trend, falling from 103 options two years ago to 82 today.
Rachel Springall, finance expert at Moneyfactscompare, said: “Those landlords with a limited deposit or equity will find deals at 80% loan-to-value are at a record high. There are now 417 options, more than double the choice back in 2023, good news for those coming off a two-year fixed deal this year.
“The downside of the past few years has been volatile interest rates; thankfully, compared to 2023, buy-to-let mortgage rates are lower, across two- and five-year fixed terms. However, if someone locked into a cheap deal back in 2020, they will be in for a shock this year when they come to refinance. Landlords will hope rates come down this year, but sticky inflation can delay further base rate cuts, and the swap rate market remains unpredictable.”
Property still a “safe long-term investment”
Landlord borrowers enjoying a greater range of buy-to-let mortgage products to choose from can also secure cheaper rates than they could a year ago, with a growing number of sub-5% deals on offer.
Like in the mainstream mortgage market, there are multiple factors involved when selecting the best mortgage option, so the cheapest interest rate may not be the best option for all. Some lenders offer fee-free options on higher interest rates, for example, which could be of benefit to those with less capital to play with.
Currently, the average two-year fixed rate on all LTVs is 5.4%, according to Moneyfactscompare. The cheapest options are available with 60% LTV, where the average rate is now 4.87%. In the five-year space, the average rate on all LTVs is 5.56%, falling to an average of 4.78% for landlords with a 40% deposit (on 60% LTV).
Rachel Springall concludes that while there are challenges facing the sector, property is “still regarded as a safe long-term investment“, adding: “But both new and existing landlords would be wise to seek advice to assess the latest deals available to them and if it’s still viable to retain their portfolio.”
