Is Now A Good Time To Get A BTL Mortgage Deal? | moneyfacts.co.uk

Derin Clark

Derin Clark

Online Reporter
Published: 18/08/2020

Over the last five months, the number of buy-to-let (BTL) product deals has fallen significantly and there are now 1,237 fewer deals available in the BTL mortgage charts compared to the beginning of March.

Research carried out by Moneyfacts.co.uk has found that at the beginning of March, there were 2,897 BTL deals available to landlords, but on 17 August, this had fallen to just 1,660. In fact, in the 17 days since the start of August, 60 BTL deals had been withdrawn from the market.

A similar picture can be seen when looking specifically at two and five year fixed rate BTL deals. As the chart below shows, at the beginning of March, there were 914 two year fixed BTL deals available in the charts – this had fallen to 625 at the start of August and has since fallen to 596 on 17 August. The number of five year fixed BTL deals available at the start of March was 1,000, which fell to 631 at the start of August and dropped to 612 on the 17 August.

 

BTL mortgage product numbers
  March 2020 July 2020 August 2020 17 August 2020
BTL product count – fixed and variable rates 2,897 1,738 1,720 1,660
Two-year fixed rates BTL – all LTVs 914 625 625 596
Five-year fixed rates BTL – all LTVs 1,000 644 631 612

 

Although on the surface the drop in BTL products will be a disappointment to landlords, especially as the temporary increase in stamp duty threshold could mean a reduction in tax paid when purchasing BTL properties, the fall in competition does not necessarily mean that landlords will be paying higher rates on their deals. In fact, when we look at what has happened to average BTL mortgage rates over the past five months, it shows a more complicated picture.

Average BTL mortgage rates

Overall, across all loan-to-values (LTV), the average mortgage rates on both two and five year fixed deals have fallen over the last five months, albeit very slightly.

On the 1 March, the average two year fixed BTL mortgage rate was 2.77%, which fell to 2.66% on 1 August, but has increased to 2.72% on 17 August. Similarly, the average five year BTL mortgage rate on 1 March was 3.24%, which had fallen to 3.06%, but has increased slightly during the month so far to stand at 3.11% on 17 August.

 

Average BTL rates (all LTVs)
  March 2020 July 2020 August 2020 17 August 2020
Two year fixed 2.77% 2.61% 2.66% 2.72%
Five year fixed 3.24% 2.97% 3.06% 3.11%

 

So, it would seem that despite the fall in BTL deals, the average rates have fallen, although they seem to have started rising over the last few weeks. On the surface, this looks like good news, but when breaking down average rates further, the LTV of the deal seems to have a significant impact on whether rates are rising or falling.

Average 80% LTV BTL rates

Since the start of March, the average two year BTL fixed rate at 80% LTV has increased very slightly, from 3.56% on 1 March to 3.58% on 17 August. Meanwhile, the average five year BTL fixed rate at 80% LTV has fallen, from 3.98% on 1 March to 3.87% on 17 August.

 

Average BTL rates at 80% LTV
  March 2020 July 2020 August 2020 17 August 2020
Two year fixed – 80% LTV 3.56% 3.18% 3.51% 3.58%
Five year fixed – 80% LTV 3.98% 3.82% 3.82% 3.87%

 

For BTL landlords, this means that their average mortgage repayments on a two year fixed deal at 80% LTV would have increased marginally, while those choosing a five year fixed rate deal will have seen their repayments fall. For example, taking the average two year rate of 3.56% available at the start of March on a mortgage of £150,000 over a 25-year term, the monthly interest-only repayments would be £445.00. With the same terms, but at the average rate available on 17 August of 3.58%, the monthly interest-only repayments will have increased to £447.50. Over a two-year period, this would be an extra £60 in repayments.

Meanwhile, those looking to take out a five year deal at 80% LTV on the average rate of 3.98% available on 1 March would have, on a £150,000 mortgage on a 25-year term, monthly interest-only repayments of £497.50. Whereas if the same deal was taken out on the average rate on 17 August at 3.87%, the monthly interest-only repayments will have fallen to £483.75. Over the five-year period, those who had taken out a mortgage at the 17 August average rate would have paid £825 less overall in repayments than those who had taken out a mortgage at the 1 March average rate.

But, as the chart above shows, average rates on both two and five year 80% LTV deals have increased slightly between 1 August and the 17 August, from 3.51% to 3.58% and 3.82% to 3.87% respectively. Although these are only slight increases to rates, as the above figures show, just a marginal increase in rate can have an impact on the amount repaid over a two or five-year period.

Average 60% LTV BTL rates

Unlike 80% LTV deals, the average rates on both two and five year 60% LTV BTL deals have increased since March. On 1 March, the average rate on a two year BTL deal at 60% LTV was 1.89%, which had increased to 2.42% on 17 August. Meanwhile, the average five year BTL deal at 60% LTV has increased from 2.31% to 2.76% during the same period.

 

Average BTL rates at 60% LTV
  March 2020 July 2020 August 2020 17 August 2020
BTL two-year fixed – 60% LTV 1.89% 2.28% 2.35% 2.42%
BTL five-year fixed – 60% LTV 2.31% 2.65% 2.73% 2.76%

 

So how will this have impacted mortgage repayments?

Taking the same example of a £150,000 mortgage on a 25-year term, landlords taking out a deal at the average 60% LTV two year rate available on the 1 March at 1.89% would make £236.25 in interest-only monthly repayments. The same deal at the average rate on the 17 August of 2.42% would result in £302.50 in interest-only monthly repayments. Over the two-year period, those making repayments at the 2.42% rate would be making an additional in £1,590 in repayments.

Again, using the example of a £150,000 mortgage on a 25-year term, using the average 60% five year rate available on 1 March of 2.31%, landlords would be paying £288.75 in interest-only repayments. Those with the same deal but at the 17 August average rate of 2.76% would be making £345.00 in interest-only monthly repayments. Over the five-year period, those on the 2.76% rate would, overall, be making £3,375 more in monthly repayments.

You can calculate your monthly mortgage repayments using our mortgage repayment calculator.

Is now a good time to get a BTL mortgage?

There are other factors apart from rate that should be taken into consideration when deciding whether to get a BTL mortgage, such as the potential savings on stamp duty and the house prices. However, when looking at BTL mortgage rates alone, landlords would be wise to consider locking into a deal while rates stay competitive low, especially as rates seem to be starting to rise. Saying this, the economic climate remains volatile, so there is no certainty that rates will continue to rise. As Eleanor Williams, finance expert at Moneyfacts.co.uk, explained: “Landlords looking to invest in the BTL sector could see this as an opportune time to explore their options, especially if they think that average rates may continue the upward trajectory we have witnessed over the last two months. However, economically, we remain in unchartered waters, with many providers exercising caution in their underwriting, so landlords or potential investors should ensure they thoroughly research and plan ahead in order to protect their investments. In these ever-fluid times, seeking advice and support from independent, qualified professionals could be invaluable in navigating their choices.”

You can consider speaking to a mortgage broker for help and advice on deciding which BTL mortgage deal is right for you.

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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