Greater buy-to-let mortgage choice but rates remain high

The number of buy-to-let mortgages in the market has recovered to levels last seen in August 2022, before the mini-budget contracted the industry.

Mortgage loan rates from landlords are also falling, but remain much higher than two years ago.

Total availability of buy-to-let products rose 7 percent last month, according to new figures from financial data company Moneyfacts.

There are now 2,400 mortgage products for landlords, the highest level since July last year.

At the same time, average mortgage rates have continued to fall for both two-year and five-year fixed contracts.

However, those coming off a firm deal will still face a mortgage shock, with current rates still about 2 percent higher than two and five years ago.

Currently, the average two-year buy-to-let fixed mortgage rate is 5.81 percent, regardless of the size of the deposit.

This is lower than last month’s 5.95 percent, but significantly higher than two years ago when it was 3.05 percent.

And the current rate is an even bigger jump from five years ago, when the typical landlord mortgage was 2.96 percent.

This means that a borrower with a £200,000 25-year mortgage is now paying £1,265 a month in interest, £321 more than five years ago and £311 more than two years ago.

Rachel Springall, financial expert at Moneyfacts, said: ‘With both two-year and five-year average fixed rates above 5 percent, compared to around 3 percent a year ago, it’s clear that landlords are likely to see their monthly payments down. much higher than they might have expected.

“Landlords may wait for a further reduction in fixed mortgage rates or even opt for a tracker mortgage to give them more flexibility to eventually switch deals.

However, interest rates are only part of the decision-making process when entering into a buy-to-let investment. Whether that’s for new or existing landlords, it’s always wise to get advice to make sure it’s the right time to make a deal.’

There are cheaper buy-to-let deals

There are currently deals on the market with lower rates that are worth investigating.

The Mortgage Works offers a fixed buy-to-let purchase agreement of 3.99 percent for two years, up to 65 percent loan-to-value.

For a five-year fix, the same lender offers a 3.98 percent deal for up to 75 percent LTV.

Both deals are aimed at people who want to take out a new mortgage instead of buying a new home. Other lenders offer deals less than 4.5 percent, for both two- and five-year fixes, including NatWest and BM Solutions.

>You can find the best deal for you using the This is Money mortgage comparator with L&C Hypotheken

While mortgage interest deductions are falling, landlords are still facing significant cost increases compared to two years ago.

However, one in three landlords struggle to get a mortgage again after failing their lender’s affordability test.

Some buy-to-let investors are forced to accept variable rates as high as 9.5 percent. Others sell their money because they can no longer pay their loan.

Riz Malik, director of R3 Mortgages, said: ‘While the number of deals available to landlords has increased, a significant proportion of rental property owners are still unable to take advantage of these opportunities.

“Many of the available deals have arrangement costs that have increased significantly since the last budget, and there is still no guarantee that these deals will result in the desired loans.”

As a result, landlords planning to refinance this year may face unexpected challenges, which could affect their tenants.

A quarter of UK adults have seen the cost of their mortgage or rent rise over the past three months, with 18-34 year olds most likely to be affected.

In comparison, just under a quarter of 55-74 year-olds expect their rent or mortgage payments to rise – possibly because a larger share of this group is likely to own their own home.