Mortgage News

Buy-to-let (BTL) remains an attractive investment opportunity for many investors, but when considering a BTL investment, it is important to factor in the costs of mortgage repayments on the property. To help new and existing landlords ensure that they are getting the best BTL mortgage deal, we’ve highlighted the top rates available in the two, five and 80% loan-to-value (LTV) mortgage charts.

With continued uncertainty around foreign travel, the UK-based holiday market is set to boom this summer and with new research showing that holiday let mortgage deals have bounced back to almost the same as what was available pre-pandemic, now could be a good time to invest in a holiday let.

Research carried out by Moneyfacts.co.uk has found that there are currently 149 holiday let deals available on the market, which is just 13 less than was available at the beginning of March 2020, before the first lockdown, when there were 162 holiday let deals. As well as this, the number of lenders offering a holiday let mortgage has increased slightly, up from 20 at the beginning of March 2020, to 21 today.

Saying this, the average rate available on a holiday rate has risen over the last year to 3.95% today, up from an average rate of 3.37% at the start of March 2020. For those considering investing in a holiday let, it could be worthwhile speaking to a mortgage broker who may be able to highlight deals offering below average rates.

Commenting on the holiday let mortgage research, Rachel Springall, finance expert at Moneyfacts.co.uk, said: “There are now more lenders offering options than six months ago – back to a spread seen in March 2020 before lockdown began – but it appears that building societies are more inclined to provide deals to meet growing demand, whether for someone who uses their own home or takes out a new loan to fund the holiday let investment. According to a recent survey by Hodge Bank, out of those purchasing a holiday home, 65% take out a new holiday let specific mortgage and 35% remortgage their existing home to finance their holiday home.

“Supply and demand may well be a key issue in 2021 for investors who feel staycations are here to stay awhile yet, and indeed according to Rightmove, national new listings stock is down 25% year-on-year. Any lack of holiday home opportunities will come as frustrating news for investors considering the return of holiday let deals on to the market, especially as sales figures nationally are rising and some consumers have more disposable income from lockdown and are therefore ready to invest. Data from PropertyMark cited that one in nine properties nationally sell more than the asking price, with recent figures hitting a five-year high.

“Clearly, for any opportunities that prospective borrowers are contemplating, it is wise they approach an independent qualified financial adviser to go through the deals currently available and to get some valuable insight into the workings of a holiday let, including tax benefits, rules regarding residency periods, rental income desirability and requirements, and other potential expenses outside of utility bills.”

Annual UK house price growth saw a slowdown in March 2021, with house prices rising 5.7% year-on-year resulting in the average house price standing at £232,134, according to the latest Nationwide House Price Index.

The figures also show that house prices fell by 0.2% month-on-month, taking into account seasonal factors, which according to Robert Gardner, chief economist at Nationwide, could be due to the original stamp duty deadline. He said: “Given that the wider economy and the labour market has performed better than expected in recent months, the slowdown in March probably reflects a softening of demand ahead of the original end of the stamp duty holiday before the Chancellor announced the extension in the Budget.”

With the extension of the stamp duty holiday to the end of June confirmed in the Chancellor’s budget earlier this month, it is expected that this will have a positive impact on housing market activity over the next six months. Beyond this, however, Gardner warns is more uncertain, he explained: “It may be that the recovery continues to gather momentum and that shifts in housing demand resulting from the pandemic continue to lift the market. However, if the labour market weakens towards the end of the year as policy support is withdrawn, as most analysts expect, then activity is likely to slow nearer the end of 2021, perhaps sharply.”

The number of buy-to-let (BTL) mortgage deals available is at its highest level since the pandemic began impacting the UK economy in March 2020, but at the same time rates have risen to a two-year high.

Research carried out by Moneyfacts.co.uk found that there are now 2,333 BTL mortgage deals available to landlords, which is the highest number seen since March 2020 when there were 2,897 deals. While this has resulted in more choice for landlords, average rates have also risen during this time and the average five year fixed BTL rate now stands at 3.41%, its highest level since September 2019 when it reached 3.44%. Meanwhile, the average two year fixed BTL rate currently stands at 3.05%, and again this is the highest it has been in nearly two years, when it also stood at 3.05% in June 2019.

As the below table shows, year-on-year the average rates on both two and five year BTL mortgage deals at 60% loan-to-value (LTV) and 80% LTV have increased. Saying this, lower than average rates are available in the BTL mortgage charts, as Eleanor Williams, finance expert at Moneyfacts.co.uk, explained: “It is important to note though that these are averages, and therefore while representative of the market as a whole, there are some very competitively priced products available, with some – depending on LTV and criteria – available at below 2%. Therefore, those who are hoping to refinance or take on a new deal would do well to shop around.”

Along with the increase in rates, landlords may also be disappointed with our findings that show on the percentage of deals that offer an incentive, such as free valuations or no legal fees, has also fallen year-on-year. “Although interestingly, the proportion of the market where cashback is available has increased, not only year-on-year, but by 8% over the last month,” Williams revealed.

This means that although lenders have been withdrawing some incentives and increasing rates, there are still good deals available and landlords would be wise to check the BTL mortgage charts to see what is available and consider speaking to a mortgage broker who will be able to highlight the best deals for their individual requirements.