Landlords looking for a remortgage deal and investors considering a buy-to-let (BTL) property will be pleased to see that the BTL mortgage market seems to be showing the first signs of recovery.
Indeed, research carried out by Moneyfacts.co.uk has found that since May, the number of BTL deals (fixed and variable) available at all loan-to-values (LTVs) has increased by 283, with the number of two year fixed deals increasing by 134 and the number of five year fixed deals increasing by 164. Saying this, while more competition has been entering the BTL market over the last two months, since May, the average rates on both two and five year fixed rate deals at all LTVs have increased slightly, however this could be due to higher LTV deals returning to the market and therefore pushing up the average rate.
|2020 BTL mortgage product number analysis|
|BTL product count - fixed and variable rates||2,583||2,897||1,887||1,455||1,738|
|Two-year fixed rates BTL - all LTVs||823||914||610||491||625|
|Five-year fixed rates BTL - all LTVs||879||1,000||695||480||644|
|2020 BTL average rates analysis|
|BTL two-year fixed - all LTVs||2.82%||2.77%||2.71%||2.51%||2.61%|
|BTL five-year fixed - all LTVs||3.19%||3.24%||3.16%||2.94%||2.97%|
"The mortgage market as a whole remains an evolving and complicated landscape, as the ongoing impact of the recent lockdown has affected product choice and rates,” said Eleanor Williams, finance expert at Moneyfacts.co.uk. “However, as our latest research shows, the buy-to-let sector has adapted well and there are indications that landlords may have cause for positivity."
In fact, with rates as low as 1.19% available in the BTL chart today, it seems that there are some highly competitive deals available to landlords. Saying this, the BTL mortgage market has not seen a harmonious return to pre-lockdown competition and landlords looking for a 60% LTV will have seen average rates rise since the beginning of the year, while 80% LTV rates have fallen.
Since January, the number of 80% LTV BTL mortgage deals available has fallen significantly, with two year fixed rate deals falling from 119 in January to just 31 available in July and five year fixed rate deals falling from 110 to 19. This has made it harder for landlords with an 80% LTV to get a mortgage deal and an increase in competition among applicants for these mortgages. While the overall number of deals have fallen, the average rate on an 80% LTV BTL mortgage has fallen since January and the average two year fixed rate fell from 3.64% in January to 3.18% in July and the average five year fixed rate fell from 4.03% to 3.82%.
There is some optimism for landlords looking for an 80% LTV as since May, the number of deals has started to increase, rising from nine two year fixed rate deals available in May to 31 in July and five year fixed rate deals increasing from six to 19. At the same time, although the number of deals has increased, the average rate on 80% LTVs has continued to fall. The average two year fixed rate fell from 3.61% in May to 3.18% in July and the average five year fixed rate fell from 4.32% to 3.82%. This means that landlords are starting to see a rise in competition in terms of both the number of products available and the rates in the 80% LTV charts.
|2020 80% LTV BTL mortgage product number analysis|
|Two-year fixed rates BTL - 80% LTV||119||141||57||9||31|
|Five-year fixed rates BTL - 80% LTV||110||150||69||6||19|
|2020 80% LTV BTL average rates analysis|
|BTL two-year fixed - 80% LTV||3.64%||3.56%||3.80%||3.61%||3.18%|
|BTL five-year fixed - 80% LTV||4.03%||3.98%||4.18%||4.32%||3.82%|
Landlords looking for a mortgage at a 60% LTV will have seen the number of products available increase since January. Since the beginning of the year, the number of two year fixed rate deals available at a 60% LTV increased from 126 to 144 in July, and the number of five year fixed rate deals increased from 128 to 146. However, between May and July there was a slight fall in the number of 60% LTV deals available, with two year fixed rate products falling from 148 to 144 and the number of five year fixed deals falling from 155 to 146.
While on the surface this may look like lenders are starting to focus on risker higher LTV lending, landlords should note that the average rates on 60% LTV deals have decreased since May, despite rising overall since January. The average rate on a 60% LTV two year fixed rate mortgage was 1.92% in January, which then increased to 2.39% in May, but has since fallen to 2.28%. Meanwhile, the average five year fixed rate deal at 60% LTV increased from 2.32% in January to 2.76% in May, before falling to 2.65% in July. Overall, this would suggest that generally, BTL mortgage rates are starting to fall.
|2020 60% LTV BTL mortgage product number analysis|
|BTL two-year fixed - 60% LTV||126||124||129||148||144|
|Five-year fixed rates BTL - 60% LTV||128||133||140||155||146|
|2020 60% LTV BTL average rate analysis|
|BTL two-year fixed - 60% LTV||1.92%||1.89%||2.24%||2.39%||2.28%|
|BTL five-year fixed - 60% LTV||2.32%||2.31%||2.62%||2.76%||2.65%|
The lowest rate in the two year fixed rate BTL chart at a 60% LTV currently comes from Leeds Building Society, which offers 1.24% (5.1% APRC) fixed until 30 September 2022. Meanwhile, the lowest two year fixed rate at 80% LTV is 2.76% (4.4% APRC) fixed until 30 September 2022 from Accord Mortgages.
In the five year fixed BTL chart, the lowest rate at a 60% LTV comes from Birmingham Midshires Solutions, which offers 1.62% (3.8% APRC) fixed until 30 September 2025. The lowest rate at 80% LTV is from Loughborough Building Society, which offers 3.09% (4.8% APRC) fixed for five years.
Landlords looking to get the best mortgage deal possible should consider speaking to a mortgage broker first as they will be able to provide advice about what deal may be best for their individual circumstances.
With the BTL mortgage market seemingly starting to make a recovery, along with saving rates continuing to fall and turbulent stocks and shares market, a BTL property may seem like an attractive investment in the current economic environment. Along with this, the need for rental properties remains high, as Williams explained: “The latest Rental Index research from lettings platform Goodlord indicates that in June, new tenancy applications remained at 90% above 2019 levels. Subsequently, they have recorded increases in rental costs and also void periods reducing, as tenant demand for new properties remains strong now that the market has reopened.”
Those considering investing in a BTL property should also take into account that this type of investment takes a lot more time and resources to manage, for example ongoing property maintenance, covering mortgage repayments when the property is empty, covering costs of late rent payments and non-payments, as well as potential day-to-day management costs. As such, investors should, ideally, speak to an independent financial adviser before investing.
Data note: Data shown is as at first working day of month, unless otherwise stated. Source: Moneyfacts.co.uk.
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.