Available options in 2021 for First-time Landlords

The latest research from Foundation Home Loans indicates that the imminent, although possibly extended end to the stamp duty holiday is unlikely to deter landlords from further purchases this year, the latest data from Moneyfacts.co.uk explores what those considering investing in the sector as a first-time landlord (FTL) may find.

While overall availability has fallen across the buy-to-let (BTL) market due to the impact of the Coronavirus pandemic, the proportion catering for FTLs has actually increased by 4% over the last year, with 65% of BTL mortgage deals currently available to this demographic.

The average fixed rates for FTLs have increased, with the two-year fixed rate average climbing 0.30% year-on-year and the five-year equivalent rising by 0.35% over the same period. These increases are steeper than those seen in the overall average rates, perhaps indicating that lenders may be pricing risk into deals for untested landlords.

Eleanor Williams said: “Factors such as house price inflation, rock-bottom savings rates (making building deposits difficult), and uncertainty in job stability and income levels may play a part in a number of potential first-time residential buyers opting instead for the less onerous commitment of staying in private rented properties. Furthermore, the BTL sector as a whole has shown itself to be relatively resilient and robust in the face of an unprecedented year, and therefore there may now be those who are considering capitalising on the opportunity to invest in the sector for the first time.

“Overall availability contracted sharply last year, which makes it even more positive to note that at 65%, the proportion of the market that is available to FTLs has grown by 4% year-on-year, meaning that would-be investors have plenty of choice, and is also an indication that providers are committed to servicing this demographic of borrowers.

“However, rates for FTLs have risen over the last year. At 3.10% and 3.66% respectively, the two and five-year fixed rate averages for FTLs have increased by 0.30% and 0.35% when compared to February 2020. Additionally, these increases are more significant than those seen in the overall BTL average rates, where the equivalent averages for all landlord types rose by 0.22% and 0.12% respectively. Therefore, would-be FTLs may wish to consider their options carefully to ensure they are securing the best possible deal for their particular circumstances, as although these averages are higher, there are still competitive deals available.

“Those who are considering whether this is the right time to invest would be wise to secure professional, qualified advice to help support and navigate through their choices; there may be benefits to setting up as a limited company, some products may require forethought regarding the number of properties they can have in their portfolio, and of course, whether the timing is appropriate for their own circumstances. Careful planning and ensuring that they protect any investments will be vital in these uncertain times.”

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