Buy To Let Updated:
Have you ever thought about trying your hand as a landlord, or perhaps you're a seasoned property investor looking to expand your portfolio? Either way, it's a great time to consider your options – research from Moneyfacts can reveal that not only is the number of buy-to-let (BTL) mortgages on the rise, but the deals are becoming cheaper, too!
The figures show a dramatic rise in the number of BTL mortgages available in recent years, up from 476 two years ago to 745 today – an increase of almost 300 products in two years alone. However, an even more notable finding is the sharp increase in the number of low rate deals available, and the fall in rates as a whole.
Two years ago, there were a total of five two-year fixed rate BTL deals priced below 3%, but today this figure has rocketed to 83. It's a similar story for the number of five-year BTL deals priced below 5% – two years ago there were 37 such mortgages available, but now there are 143 of them on the market.
Rates as a whole have fallen dramatically, too, with the average two-year fixed rate BTL deal currently priced at 3.45% (down from 4.44% two years ago), and the average five-year deal standing at 4.25% (down from 4.67%). The table below highlights this in more detail.
As you can see, there's been a definite rise in the number of cheap BTL deals on the market, and availability on the whole has experienced a welcome boost. It's opened the market to an increasing number of borrowers looking to start or expand their property empire, and there are even expectations that this number could increase further.
Much has been made of the recent pension reforms and the potential BTL boom that could result, as retirees take the opportunity to empty their pension pots and invest the funds in property instead. But is it likely to materialise?
Really, it depends on the views of the individual. Withdrawing the entire pot as a lump sum still has tax implications that could make the move less appealing, particularly if it pushes them into a higher tax bracket. Any withdrawal (above the first 25% tax-free element) will be taxed as income, and if it's a sizeable pot – which it probably will be for those considering property investment – it could well lead to a higher or additional rate tax charge being applied.
Then there are the other implications to consider with BTL (such as capital gains tax, the risk of void periods and needing to secure suitable insurance), but for some, investing in property as a pension could still be a viable option. Charlotte Nelson, finance expert at Moneyfacts.co.uk, comments: "Buy-to-let mortgages are experiencing a renaissance, becoming not only more widely available but cheaper, too.
"With more five-year fixed rate deals charging below 5% than ever before, it is little wonder that the newly emancipated pensioners are genuinely considering buy-to-let as a retirement option. But those looking at this route as an alternative to a pension need to look at all aspects of the mortgage.
"Many lenders restrict the age they will borrow up to, so older borrowers would be wise to seek the guidance of a financial adviser who can access a larger portion of the market. Nonetheless, with easy savings to be made you are now likely to be recouping more in rent, which will allow you to get a bigger return on an investment."
The number of cheap BTL deals is most definitely on the rise, so why not take advantage? Whether you're using it as your pension or as a supplement to your income, there's never been a better time to consider it. Check out our best buy tables to find the mortgages that could make your BTL dreams a reality.
Compare BTL mortgages
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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