BTL rates fall since start of the year

Landlords considering investing or refinancing will be pleased to see the latest data from Moneyfacts.co.uk, which illustrates interest rates for investors are beginning to decrease.

Since the start of this month, the average BTL two and five-year fixed rates for all loan-to-values (LTV) have fallen by 0.04% and 0.05% respectively, and since March 2021 by 0.10% and 0.11%. At 2.95% and 3.30%, both rates are now the lowest they have been since the beginning of this year (January 2021: 2.89% and 3.27% respectively).

When considering the LTV tiers, the largest reductions since the start of this month have been seen at 65% LTV. At 2.68% and 3.17%, the two and five-year fixed averages have dropped by 0.20% and 0.15% respectively since the start of the month, which is great news for landlords with the required level of deposit or equity.

Prospective investors with lower levels of deposit or equity may wish to note that although the average two-year fixed-rate at 80% LTV slightly increased over the course of this month to sit at 4.20%, the number of options available to borrowers in this tier, where rates are traditionally higher due to the higher level of risk, have also risen. However, those preferring the longer stability of a five-year fixed-rate at 80% LTV may be pleased to see that this rate has dropped by 0.04% since the start of the month.

Eleanor Williams, Finance Expert at Moneyfacts.co.uk, said: “As lockdown restrictions begin to ease, the prevailing sentiment in the UK seems to be that of optimism. For a sector that has been beset by various changes and challenges over the last five years or so, the BTL market is exhibiting remarkable resilience. While it goes without saying that the last year has presented great challenges to many investors in the sector, the latest Lettings Index from Hamptons illustrated that rents have risen by 5.9% in Great Britain in April 2021, the fastest rate of growth it has recorded since January 2015.

“Our latest research shows that landlords searching for a deal may be very pleased to see that the overall two and five-year average fixed rates for all LTVs – currently at 2.95% and 3.30% respectively – have dropped to the lowest levels since the start of this year, with both having fallen further in the first 21 days of this month. This seems to show an appetite for business from lenders to cater to borrowers who are keen to invest. Indeed, as providers continue to tweak their ranges, we have seen rate reductions of as much as 0.90% from TSB, while Virgin Money made cuts of up to 1.06% on a selection of its products this month.

“Hampton’s indicated that the rise in rental growth may well be linked to the fact that there were 45% fewer homes available for rent in April 2021 compared to April 2019. For investors contemplating an expansion into the BTL sector, demand from tenants is booming and while it remains difficult to earn a decent return on many forms of investment, it’s understandable why rental property could be a tempting option.”

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