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Buy-to-let product choice reaches 14-year high

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Written by: Su Fowler
24/01/2022
There are signs of confidence in the buy-to-let sector, as data suggests demand for rental properties may remain strong in 2022, according to Moneyfacts.

According to Moneyfacts, there was an increase from December to January of 222 products on offer to landlords, bringing the current total to 3,528. It said it was the most since September 2007 and was nearly 1,000 more than in January 2020, before the Covid-19 pandemic.

The site also said the provision of mortgages for those with smaller deposits or levels of equity was a sign of confidence in the BTL sector, saying that 28 products were now available at 85% loan-to-value (LTV). This is the most since March 2020 when it was just 32 and a rebound from January last year when the figure was zero.

The average overall two-year fixed BTL rate has increased, Moneyfacts said, for the second consecutive month, rising by 0.04%  to 2.94%, making it the highest since September when it was 2.94%. In contrast, the average overall five-year fixed rate had held steady at 3.18% since October 2021, the lowest it had recorded since the 3.06% in August 2020.

More choice for landlords

Eleanor Williams, spokesperson at Moneyfacts, said: “The level of product choice available to landlords has continued to increase for the eighth consecutive month, with the number of options across all the LTV tiers improving.

“The rise of 222 deals is the highest month-on-month increase in availability that we have recorded since July 2021. At 3,528 total deals on offer, this is the largest number of BTL products we have seen in more than 14 years.”

This occurred, she said, despite the pandemic and changes to regulations and  taxation.

“BTL lenders seem keen to entice borrowers,” Williams added, “as there are almost 1,000 more products available now than there were two years ago in January 2020, before the onset of the pandemic.”

“Following the increase in base rate by the Bank of England last month, we have seen the average two-year fixed rate for all LTVs rise by 0.04% since last month to 2.94%, a shift which echoed recent changes in the residential mortgage sector.”

Landlords looking to secure a five-year fixed rate in the brackets between 65% and 80% LTV, she said, “will find that the average five-year fixed rates in these tiers fell month-on-month, which is great news for those hoping to protect themselves from potential future rate rises with the stability of a mid-term fixed rate deal.”

As an example, she said that landlords who “took out a 75% LTV five-year fixed rate in 2017 and are looking for an equivalent deal now will find that, at 3.19%, the average rate is 0.70% lower now than when they secured their previous deal.”

However, she added, “Landlords who have a smaller level of deposit or equity, however, may find that, as with the two-year fixed rate, the average five-year fixed rate in the top 85% LTV tier has risen. Increasing by a significant 0.30% this month, at 5.52% this is now 0.23% above where the equivalent rate sat in January 2017.”

More risk in a niche lending area

Williams said buy-to-let lending remained a “niche” area as it was viewed as high risk by lender.

She added: “Therefore, it takes very little movement, or just a slight adjustment from any of the handful of lenders who operate in this arena, to make a notable impact to the average rates.”

Citing the latest rental market report from Zoopla, she said that “rental demand grew to a 13-year high in the third quarter of 2021, and while demand for property continues to outstrip supply, it also recorded an increase in average UK rents of 4.6% over the year.”

She added: “Our latest data suggests that providers seem prepared to offer a variety of deals for landlords who are either investing in property or are looking to lock into a new deal, so anyone considering their next move in the BTL arena would be wise to seek advice from an independent broker to assess the changing market.”

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