Buy to Let

Buy-to-let mortgage rates fall and product availability rises

Buy-to-let mortgage rates fall and product availability rises
Christina Hoghton
Written By:
Christina Hoghton

The number of buy-to-let mortgage products has grown almost threefold compared to the same period last year to 2,581 and fixed rates have started to come down, research has found.

According to Moneyfacts, the total number of buy-to-let products has jumped from 988 in October last year to around 2,581 this year.

The number of products has also increased month-on-month from 2,475 in September this year to over 2,500 currently.

There has been significant growth in two-year fixed rates, which have increased from 183 in October last year to 773 at the moment.

Within that, two-year fixed rates at 60% loan to value (LTV) nearly doubled from 35 to 67; at 75% LTV deals rose from 84 to 379; and at 80% LTV the count grew from 28 to 97 over the past year.

On the five-year fixed rate side, total products increased from 375 to 1,136 in the last 12 months, with significant growth at 75% LTV.

At 75 per cent LTV, the product count has risen from 197 to 613 in the last year, and at 60% LTV the product count has jumped from 36 to 81 in the same period.

Five-year fixed rates at 80% LTV have gone from 52 in October last year to 85 currently.

BTL rates begin to fall

Moneyfacts said that fixed rates had started to tick down, with the average two-year fixed rate falling from 6.64% in September to 6.4% in October.

The average five-year fixed rate has fallen from 6.49% in September to 6.32%  in October.

However, pricing remains elevated compared to last year, with the average two-year fixed rate pegged at 5.57% and the average five-year fixed rate was 6.05%.

Moneyfacts added that landlords coming off a five or two-year fixed rate and looking to remortgage will find the average rate at least 3% higher than previously, with the average two-year fixed rate in October 2018 coming to 2.9% and 2.92% in October 2021.

The average five-year fixed rate in October 2019 was 3.4% and in October 2021, it was 3.18%.

‘Encouraging signs in buy-to-let market’

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “The buy-to-let market has seen a healthy growth in product choice month-on-month and fixed rates have fallen over the same period.

“These are encouraging signs for landlords looking to refinance who may have been concerned about rates escalating.”

However, she said landlords coming off their two or five-year fixed rate deals would “need to find more funds to afford higher mortgage repayments”, as rates were much higher than when their initial deal was taken out.

Springall continued: “Borrowers with just a 20% deposit or equity will find average rates across two- and five-year fixed terms have dropped below 7% this month and choice in this niche area of the market has grown.

“Landlords who have a larger deposit or equity of 25%, and are prepared to lock into a five-year fixed mortgage, will find the average rate at 75% LTV stands at its lowest point since June 2023 (5.85%). Product choice for a five-year fixed deal at 75% LTV stands at its highest point on record, with over 600 deals to choose from.”

Springall said that some landlords may “seriously be considering selling up, as the profitability of a buy-to-let portfolio may not be enough to cover costs”.

“Over the years, landlords’ profit margins have been hit by a cull in mortgage rate tax relief, tax changes for capital gains tax and holiday lets, plus new EPC requirements. The enticement to invest for new landlords is prevalent, as rental growth on a newly-let property hit 12% across Great Britain, according to a study by Hamptons, which also cited the long-term decline in rental stock will continue to underpin future rental growth.

“The months ahead for the buy-to-let sector are crucial, so any investor would be wise to seek advice before they commit and be conscious of any rental expectations amid rising costs. Providers will need to carefully balance supporting their existing customers and work hard to entice new business to encourage an optimistic outlook for investors in the months ahead,” she noted.