Quantcast
Menu
Save, make, understand money

Buy To Let

Buy-to-let mortgage choice rises to seven-month high as rates begin to drop

Nick Cheek
Written By:
Nick Cheek
Posted:
Updated:
06/03/2023

Some good news for landlords as buy-to-let products head north once again. There are currently 2,400 buy-to-let mortgages on the market, meaning choice has returned to a level not seen since August 2022.

The last time buy-to-let mortgage availability was at or near its current level was last August, when there 2,375 products on the market, according to Moneyfacts.

This was the month before the mini Budget saw options pulled off the shelves. 

The options for landlord borrowers in March are also better than in February when there were 2,246 buy-to-let mortgages available. And the level of buy-to-let mortgages available this month is the highest since July last year which had 2,746 options.

Moneyfacts said this was an “encouraging sign of recovery”. 

There are more five-year fixes on the market than two year-fixes with 914 of the former compared to 632 of teh later.

There are also more higher loan to value (LTV) options. For landlords with a 40% deposit and requiring a mortgage at 60% LTV, there are 95 two-year fixes and 107 five-year fixes. At 75% LTV, there are 313 two-year fixed choices and 436 five-year fixed options. 

Rates fall but payment shock risk remains

Average rates for buy-to-let mortgages have reduced and now stand at 5.81% for a two-year fix and 5.72% for a five-year fix. These are compared to respective average rates of 5.95% and 5.85% in February. 

There is still a gap between average rates on last year. In March 2022, the average two-year fixed rate stood at 3.05% while the average five-year fixed rate was 3.29%. Meanwhile, in 2021, the corresponding average rates sat at 3.08% and 3.41%. 

This means any landlords refinancing this year may face a 2% increase to their mortgage rate. 

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “It is encouraging to see buy-to-let product choice gradually recover from the shock surrounding the fiscal announcement.  

“The drop in average buy-to-let rates appear more subdued than seen within the residential mortgage sector, but lenders have made moves to entice new business despite some investors’ concerns surrounding rental income margins.” 

Springall said landlords were “likely to see their monthly repayments much higher than they perhaps anticipated”.  

She added: “There may even be those looking to sell up this year because of the rise in interest rates, tax changes for holiday lets and capital gains tax or even energy performance certificate requirements – all of which dampen profit margins or investment returns on sale of a property. 

“Landlords may be waiting for fixed mortgage rates to come down further or indeed opt for a tracker mortgage to give them more flexibility to eventually switch their deal. However, interest rates are only part of the decision-making process when entering a buy-to-let investment.”