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Mortgage options are increasing for first-time buy-to-let landlords

As the number of first-time buy-to-let landlords has risen, mortgage availability is increasing for new landlords. What does this mean for the sector?

Over the past 12 months, the percentage of mortgage deals available for first-time buy-to-let landlords has risen. The number of deals has fallen year-on-year. However, mortgage availability decreased overall throughout the COVID-19 pandemic.

On 1 February 2020, there were 1,635 mortgage deals available for new investors. A year later, this decreased to 1,311, but the percentage of the buy-to-let market available to first-time landlords has risen from 61% to 65%.

Eleanor Williams from Moneyfacts says: “Overall availability contracted sharply last year, which makes it even more positive to note that at 65%, the proportion of the market that is available to first-time landlords has grown by 4% year-on-year, meaning that would-be investors have plenty of choice, and is also an indication that providers are committed to servicing this demographic of borrowers.”

The current state of the mortgage market

At the end of 2020, mortgage approvals hit a 13-year high and has continued at record levels. With the stamp duty holiday extension, the sector will likely remain busy in the coming months. Mortgage availability even recently hit the highest level since the first national lockdown in March 2020. This shows lenders are continuing to gain more confidence.

The government also recently announced the new mortgage guarantee scheme, which will provide greater mortgage availability for homebuyers with 5% deposits. This will especially help first-time buyers find more mortgages with smaller deposits.

A rise in first-time buy-to-let landlords

Over the past year, there has been a rise in small and first-time buy-to-let landlords. The stamp duty holiday and low interest rates have enticed more new landlords to enter the buy-to-let sector. During times of instability and uncertainty, and when savings rates are especially low, property in the UK can be an especially attractive form of investment.

With an increase in new landlords entering the market, lenders have gained more confidence and are becoming more willing to lend to first-time landlords. Throughout the coming months, mortgage availability will likely further increase, providing greater choice and competition.

On 1 February 2021, the average two-year fixed rate for first-time landlords was 3.1%. And the average five-year fixed rate sat at 3.66%. However, there are much more affordable deals than these average rates. The lowest rate currently available is 1.64% for a two-year fixed mortgage.

“Those who are considering whether this is the right time to invest would be wise to secure professional, qualified advice to help support and navigate through their choices,” Eleanor Williams comments.

“There may be benefits to setting up as a limited company, some products may require forethought regarding the number of properties they can have in their portfolio, and of course, whether the timing is appropriate for their own circumstances. Careful planning and ensuring that they protect any investments will be vital in these uncertain times.”

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