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Buy-to-let fixed rates fall to lowest level in two years

Buy-to-let fixed rates fall to lowest level in two years
Anna Sagar
Written By:
Anna Sagar

Fixed rate pricing in the buy-to-let sector has dropped to its lowest point since September 2022, figures have shown.

According to figures from Moneyfacts, the average two-year fixed rate across all loan to value (LTV) tiers is 5.49%, with the average five-year fixed rate standing at 4.87%.

The report noted that this is down from a peak six months ago of 6.88% for an average two-year fixed rate and 6.72% for an average five-year fixed rate. These were the highest in Moneyfacts’ electronic records, which go back to 2011.

Looking at specific LTV tiers, some of the largest decreases were at 60% LTV. The average two-year fixed rate at 60% LTV fell by 1.42% to 5.22%, with the average five-year fixed rate contracting by 1.31% to 4.87%.

Going up to 75% LTV, the average two-year fixed rate decreased by 1.36% to 5.51% and the average five-year fixed rate went down by 1.25% to 5.51%.

The average two-year fixed rate at 80% LTV has reduced by 1.24% to 6.3%, and the average five-year fixed rate has fallen by 1.09% to 6.2%.

Total buy-to-let products fall by nearly 300 since start of 2024

Regarding overall buy-to-let product availability, since the start of the year there has been a contraction of products from 3,114 in January to 2,838 in February.

This is still above the 2,585 reported in August last year, when buy-to-let pricing was at its peak, and higher than the February 2023 figure of 2,246.

Looking at two-year fixed rates, product availability overall has increased slightly from 968 in January to 972 in February. This is also up from 676 in August and 539 in February last year.

On the five-year fixed rate side, there were 1,215 deals in February, a fall of 109 products on the prior month. It is up, however, on the August figure of 1,107 and a recovery from 865 in February last year.

Weeks ahead will be crucial for buy-to-let pricing

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said that landlords worried about interest rates would be pleased to see that buy-to-let pricing has fallen to its lowest point since September 2022.

“These rates sat at a record-high just six months ago, so this is positive news for borrowers who have been patiently waiting for fixed rates to come down. However, it is possible fixed rates will edge up slightly in the coming weeks due to volatile swap rates, so those looking to refinance may wish to secure a deal quickly to not be left disappointed,” she noted.

Springall said that a “notable area of volatility in the market” was around product choice, with the overall count falling month-on-month, but it was up 250 deals compared to six months ago.

“The ebb and flow of deals makes it essential for prospective borrowers to seek advice to navigate the options available to them. Deeper analysis of product choice shows five-year fixed offers have waned month-on-month, but two-year fixed offers are resilient.

“It will be interesting to see how lenders adjust their ranges in the weeks to come. There are more two- and five-year fixed mortgages now than there were six months ago,” she said.

Springall pointed to strong rental growth of 8.3% in Great Britain, which was the lowest for 13 months, but is expected to rebound ahead of inflation for the rest of the year.

“Still, there will be existing landlords concerned about the ongoing profitability of a buy-to-let portfolio as their margins have been impacted by a cull in mortgage rate tax relief, tax changes for capital gains tax (CGT) and holiday lets, plus new EPC requirements. Any investor would be wise to seek advice before they commit, and providers will need to work hard to encourage borrowers to refinance and attract new business,” she added.