BTL product options return to the market

Despite the ongoing and undeniable impact of the Coronavirus pandemic, the latest research from Moneyfacts.co.uk demonstrates that landlords may have cause to remain positive as options return to the market.

Despite a small reduction of 27 products since the start of this month, at 1,976, overall buy-to-let (BTL) product availability is still at the highest level we have seen since March 2020 before the impact of Coronavirus started to be felt – although this clearly remains some way below pre-pandemic levels.

80% loan-to-value (LTV) remains the highest available tier, and landlords with the 20% deposit or equity required will be pleased to note that even in this traditionally higher-risk tier, the number of deals available has risen by 26 since December, indicating lender confidence.

Both the average two-year fixed rate for all LTV brackets (2.92%) and the equivalent average five-year fixed rate (3.29%%) have risen to the highest levels we have recorded since November 2019 (when these were 2.96% and 3.40% respectively). Indeed, at all LTV tiers, average rates are currently higher than we recorded in January 2020, which may spur some would-be borrowers to consider their options sooner rather than later.

Eleanor Williams, Finance Expert at Moneyfacts.co.uk, said:

“Buy-to-let investors may be pleased to see the optimism illustrated by recent research from Fleet Mortgages, which inferred that demand for rental properties has remained strong as a result of the pandemic leading consumers to prefer the shorter-term financial commitment of renting, as opposed to the cost and commitment involved with purchasing their own property in these uncertain times. This trend has been borne out in our latest research, by the positive increase in the availability of BTL mortgage products since November, resulting in landlords having the highest number of deals to choose from since March 2020.

“Following an overall increase of 158 since December, there are now 1,976 BTL products on offer, with growth being seen across nearly all the LTV tiers. It is especially positive for landlords with lower levels of deposit or equity, as this growth has extended to the slightly higher-risk 80% LTV bracket. Here, an increase of 26 deals since December could be an indication that despite the still uncertain economic outlook, BTL mortgage providers are keen to cater to these customers.

“A note of caution, however, as our data reflects the fact that the market remains volatile since the start of the New Year. Lenders have been adjusting their offerings and consequently, availability continues to fluctuate – there are now 27 fewer mortgage products on offer than there were just a couple of weeks ago, and so those considering exploring a new BTL mortgage could do well to secure the knowledge and advice of a qualified adviser, to ensure they keep abreast of any relevant changes.

“Another consideration for those who may imminently wish to secure a new BTL deal is the fact that average rates across the LTV tiers are all currently in excess of their equivalents year-on-year. Both the two and five-year average fixed rates for all LTVs (2.92% and 3.29% respectively) are 0.10% above their January 2020 equivalents. When looked at as individual tiers, it is surprising to see that the 60% LTV two and five-year average fixed rates (2.55% and 2.84%) have seen some of the largest increases when compared to January 2020, now 0.63% and 0.52% higher respectively. The rise in these rates occurred significantly between March and April 2020 (increasing by 0.35% and 0.31% respectively month-on-month), which was as availability was contracting at its quickest, and could therefore partially be due to lenders mitigating risk as borrower demand was focused on these options while availability in the higher LTV tiers was limited. Furthermore, with ongoing economic concern, it may be that lenders have increased their provisions for defaults with rate increases at tiers that previously were more competitive.”

“Recent research from Hamptons suggests that prospective tenant numbers in December 2020 outstripped 2019 levels, while the number of available rental homes dropped everywhere outside of London, driving a rise in rental growth that has recently outpaced house price growth. This seems to confirm that there is cause for optimism and that despite the knocks of recent years, the BTL sector has a vital place in our economic recovery.”

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