"Whilst the number of available products has increased, so too have the average rates, which may be of less cause for celebration."
However, whilst the number of available products has increased, so too have average rates.
Buy-to-let product choice has risen steadily, with an increase of 143 products when compared to the number available at the start of August. However, this is still over 1,000 products less than were offered in this sector in March, prior to the onset of the pandemic.
The average two-year fixed rate for all LTV brackets is now higher than at the start of the coronavirus pandemic, up 0.09% to 2.86% compared to the 1st of March. The equivalent average five-year fixed rate now sits at the same level that it did over the same time period at 3.24%.
Also higher than prior to the onset of the pandemic are the two and five-year fixed average rates at both ends of the LTV spectrum. At 60% LTV these are now 2.52% and 2.91% respectively, 0.63% and 0.60% above where they were in March, and at 80% LTV the equivalent rates have increased by 0.42% and 0.30% respectively to sit at 3.98% and 4.28%.
Eleanor Williams, finance expert at Moneyfacts, said: “Our latest research evidences further resilience in the buy-to-let sector, with product choice steadily increasing since the start of August, supporting reports that housing market activity may be experiencing a mini-boom. At 1,863, this is still a way off the 2,897 deals offered to borrowers at the start of March, however, our data shows that since 1 August the number of mortgage products for landlords has risen by 143, with 57 of those new products becoming available since the start of September. This will be good news for landlords wanting to purchase or refinance a rental property, who may be aware that the number of new prospective tenants hit its highest recorded level as demand from renters continues to grow.
“However, whilst the number of available products has increased, so too have the average rates, which may be of less cause for celebration. The overall average rate for BTL two-year fixed rates at all LTVs is now higher than 1 March – before the Coronavirus pandemic took hold. At 2.86% this is 0.09% higher than in March, and has increased by a substantial 0.20% since 1 August. Those landlords considering the longer-term stability of an equivalent five-year fixed rate deal though may be pleased to see that at 3.24%, this is now at the same level that we saw in March, although again, it is worth noting that this has jumped 0.18% since the beginning of August.
“One factor that may have contributed to the increases in the overall average rates is the positive news that since mid-August 85% LTV deals have become available to buy-to-let borrowers once more. These higher risk products traditionally carry higher initial rates - our data shows the average 85% LTV two-year fixed is 5.39%, and the five-year equivalent is 5.59%. Therefore, despite having an impact on the recent rate increases, this does also point towards further evidence of providers’ appetite to lend in this sector, and is good news for those hoping to invest or refinance with lower levels of equity or deposit.
“It is relevant to note though that the return of these deals is not solely responsible for the overall average rate increases; other LTV tiers have also seen further rate rises recently. The two- and five-year fixed average rates at 80% LTV have seen increases of 0.42% and 0.30% respectively since March, while the 60% LTV equivalents have experienced even steeper raises of 0.63% and 0.60% over the same period, with all four areas being higher than prior to the onset of the pandemic. Therefore, any landlord wanting to explore their mortgage options at this time would do well to compare the products available to them carefully.
“While rates are rising, those landlords wanting to capitalise on the current level of demand and the possible savings available via stamp duty relief before this expires at the end of March, may decide to explore their options before rates potentially increase even further. However, those considering investing or refinancing may wish to carefully plan and ensure that they protect any investments.”
