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The booming buy-to-let mortgage market

The booming buy-to-let mortgage market

Category: Buy To Let

Updated: 16/11/2015
First Published: 16/11/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Thanks to high rents and ever-growing demand, the popularity of buy-to-let (BTL) as an investment option continues to soar. Lenders are taking advantage of this surging level of demand and are doing all they can to attract new BTL borrowers, and our data shows that they're pulling out all the stops to entice new customers…

A competitive market

Lenders are actively competing for your business, which means that now could be a great time to consider your options. Indeed, average BTL mortgage rates have fallen dramatically in recent years and are now at historic lows – the average two-year BTL mortgage rate has fallen by 0.37% in the last year alone, and by almost 2% since 2010 – while the number of deals that have no arrangement fee has more than doubled in the last year, making it more cost-effective than ever before.

Take a look at the table below to see just how rapidly the market has improved:

Nov-10 Nov-13 Nov-14 Today
Average Buy-to-Let Two-Year Fixed Rate 5.23% 4.07% 3.63% 3.26%
Average Buy-to-Let Five-Year Fixed Rate 6.12% 4.55% 4.33% 4.06%
Number of Buy-to-Let Deals Without a Fee 16 35 64 130

Charlotte Nelson, finance expert at Moneyfacts, said that the BTL market is clearly booming, and that thanks to rents at new highs and mortgage rates at historic lows, "there is great potential for prospective landlords".

"The finding that the average two-year fixed rate has fallen by 0.37% in just one year is particularly good news for older borrowers who are looking to access their pension pots to invest in bricks and mortar," she added. "Meanwhile, the increase in deals with no fee is a sign that BTL lenders are trying to diversify and offer borrowers more choice than ever before, but they'll still need to weigh up the true cost of a mortgage to ensure the best deal is secured."

Is the future as bright?

However, while the market is certainly looking positive at the moment, there are fears that this may not remain so for much longer. "The Bank of England has recently gained new powers to regulate the buy-to-let market, which may mean that the end is nigh for these low-cost deals," explained Charlotte. "Potential landlords looking for a fixed rate should therefore act fast to ensure they are not disappointed.

"Future legislative changes to the BTL market could also mean that potential profits will fall, so investors need to keep an eye on any announcements to ensure BTL will still be profitable for them."

Remember, in order to secure a mortgage, credit card or personal loan you need to have a good credit rating. To find out if yours has a clean bill of health, contact a credit check provider, such as Experian CreditExpert to investigate your credit report.

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.