Get the latest on buy-to-let mortgages...
The buy-to-let (BTL) mortgage market is currently enjoying a post-pandemic growth as a blend of historic low rates, rising house prices and increased rental demand has encouraged lenders to reach out to would-be investors with a wider range of competitive low-rate deals – the highest number of BTL mortgages available since 2007 according to Moneyfacts. Read on to discover what exactly is happening in the BTL mortgage market and how it could help you build your portfolio. Increased availability of BTL products and lower, competitive rates.
Whilst the BTL mortgage market has seen a positive recovery over the past six months, it’s fair to say that changes in the residential mortgage market post-lockdown have been more rapid, or have at least been more noticeable – helped in large by significant press coverage of the government’s 95% loan-to-value ‘ Mortgage Guarantee Scheme’ and sub 1% rates in an effort to throw a lifeline to first time buyers – who had been outpriced of the market when lenders essentially shut up shop on low-deposit lending. It now looks as though the lender rate war has finally caught up with buy-to-let landlords, however, with average BTL two-year fixed rates dropping by 0.03% and 0.04% for five-year fixed deals.
This puts average two-year fixed BTL deals at 2.94% and five-year fixed deals at 2.35% – the lowest it’s been since the start of the year according to Moneyfacts. The Mortgage Works and Platform are just two of the many BTL lenders who are currently offering attractive low rate two-year fixed deals to investors who don’t own through a limited company.
Explore the latest buy-to-let mortgage deals available through Countrywide Mortgage Services.
As with the residential market, these low rates are a by-product of increased competition amongst lenders, all striving to offer the best BTL deal after a lull of activity at the beginning of the year. As more and more lenders join the fray, constantly outpricing each other on rate, landlords are seeing an influx of products to choose from. Low rates equals increased completion which in turn equals greater availability, meaning investors are spoilt for choice. Moneyfacts.co.uk data suggests the number of deals at the beginning of September this year was 2,968 – nearly twice as many as September 2020 and the highest since their records began in 2007. Interestingly, the rate gap between buy-to-let and residential mortgages has also started to close in recent years as more lenders enter the market – with BTL deals historically being much higher.
The main difference between the two now however is in the high loan-to-value (LTV) space. Although lenders are willing to offer enticing deals to residential first-time buyers with low deposits, they seem reluctant to take on these risks for landlords with low equity or only a 15% deposit. In some cases BTL mortgage rates at 85% LTV (the maximum) have even seen an increase. This suggests that the best low-rate deals for investors are to be had in the 60-65% LTV bracket. Other changes impacting on the buy-to-let mortgage market and things to consider Stamp Duty has had an impact on the BTL market as increased house prices has prevented investors from adding to their portfolio – namely because they weren’t prepared to pay a higher price during that period and impact their yield.
Home movers on the other hand have entirely different motivations (possibly pandemic influenced) and goals to buy without the consideration of rental income and would therefore be more likely to pay more to secure their dream home. This being said, there is a huge opportunity for landlords at the moment with record levels of rental demand and rapidly rising rental values. Discover more in our Lettings Market Update. Some experts have suggested that the fall in BTL mortgage rates and increased affordability in products has actually offset the impact of tax relief changes. The important thing to bear in mind here however is that when interest rates do rise again, the impact of these regulatory changes will once again become more apparent.
Please note, Countrywide Mortgage Services do not provide advice in relation to tax and capital gains, therefore you would need to seek independent advice on this. Whilst low interest rates are great for mortgage payments, it’s not so great for those looking to save. The market has therefore seen a big increase in customers considering investing their money in a ‘holiday let’ rather than a traditional savings account, partly due to the attractive low rates at the moment and partly to take advantage of the surge of staycationers in the UK. Again, you will need to seek independent legal advice on the tax implications, among others, on this. Nothing lasts forever and low rates are no exception At some point the Bank of England will look to raise the base rate from the current historic low of 0.1%. This change will likely ripple through the mortgage market as lenders are forced to increase their product pricing to remain viable. If you’re coming to the end of a fixed deal soon it’s therefore important to consider speaking to a professional who can advise you on your options including an explanation of the costs involved. Countrywide Mortgage Services can compare hundreds of BTL mortgages to find the best deal for your portfolio, including a review of your insurance and personal protection.