BTL mortgage market recovers with lower rates and more options

The buy to let mortgage sector has bounced back from the pandemic slump with lower fixed rates and more product options, according to the latest analysis by Moneyfactscompare.co.uk.

The comparison site found that the overall BTL product availability – both fixed and variable – has improved month-on-month by more than 100 deals.

There are now over 2,500 options available for landlords, which is an encouraging sign of recovery.

A year ago, there were less than 1,000 options due to the impact of Covid-19 on the market.

Average fixed rates have also fallen month-on-month, both over a two-year or five-year fixed term.

However, landlords coming off a five- or two-year fixed rate deal and looking to remortgage will find the latest average rates are around 3% higher than they were before the pandemic.

‘Buy to let market has seen a healthy growth’

Rachel Springall, the finance expert at Moneyfactscompare.co.uk, said: “The buy to let market has seen a healthy growth in product choice month-on-month and fixed rates have fallen over the same period.

“These are encouraging signs for landlords looking to refinance who may have been concerned about rates escalating.

“However, those coming off a two- or five-year fixed rate deal will need to find more funds to afford higher mortgage repayments.”

She added: “The average buy to let rate on a two-year fixed mortgage in October 2021 was 2.92%; it has now more than doubled to 6.40% while the average rate on a five-year equivalent in October 2018 was 3.40%, and now stands at 6.32%.”

The analysis also revealed that borrowers with just a 20% deposit or equity will find average rates across two- and five-year fixed terms have dropped below 7% this month and choice in this niche area of the market has grown.

Landlords who have a larger deposit or equity of 25% and are prepared to lock into a five-year fixed mortgage, will find the average rate at 75% loan-to-value stands at its lowest point since June 2023 (5.85%).

Stands at its highest point on record

Product choice for a five-year fixed deal at 75% LTV stands at its highest point on record, with over 600 deals to choose from.

Ms Springhall said: “Despite such positivity, some landlords may seriously be considering selling up, as the profitability of a buy-to-let portfolio may not be enough to cover costs.

“The enticement to invest for new landlords is prevalent, as rental growth on a newly let property hit 12% across Great Britain, according to a study by Hamptons, which also cited the long-term decline in rental stock will continue to underpin future rental growth.”

She adds: “The months ahead for the buy to let sector are crucial, so any investor would be wise to seek advice before they commit and be conscious of any rental expectations amid rising costs.

“Providers will need to carefully balance supporting their existing customers and work hard to entice new business to encourage an optimistic outlook for investors in the months ahead.”

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