2-year fixed B2L popularity increases

Sarah Davidson

January 9, 2015

Nearly a quarter (23%) currently favour 2-year fixes compared to 12% in the first quarter of 2014.

This has come at the expensive of long-term fixes, as currently 31% favour 5-year fixes, down from 34% in quarter one 2014.

The popularity of 3-year fixes has also fallen from 21% to 15%, while just 8% would opt for a 10-year fix if it became available.

David Whittaker, managing director at Mortgages for Business, said: “Tempted by cheap rates, landlords are deciding to take their chances with a shorter-term deal.

“It’s true that these ultra-competitive mortgage rates will probably continue for some time – as the financial world increasingly predicts virtually zero inflation in the UK and Eurozone, plus a cooling rate of economic growth.

“However, we maintain our recommendation to fix for longer, particularly where the pricing difference between 3 and 5-year fixed rates is narrow.”

Currently three quarters of landlords (73%) think lenders should ease up criteria, up from under half (47%) at the start of 2014 when investors were focused on seeing the cost of rates and fees fall.

Landlords with larger portfolios commonly want lenders to remove age restrictions and non-property related income requirements, increase lending to limited companies and take more of a ‘common-sense’ approach to underwriting.

Whittaker added: “Unfortunately for the more seasoned investor, the mainstream buy-to-let lenders tend to focus their business on landlords with smaller portfolios who don’t rely on the rent to earn a living.

“They do this for two main reasons; to reduce their exposure to risk and to keep costs down.

“And whilst there are a handful of good, specialist lenders catering to the needs of professional investors, there is capacity in this space for more providers and I would expect to see a few more join the fray in 2015.”

The number of investors looking to expand their portfolios in 2015 has decreased from 60% in quarter one 2014 to stand at 55%.

Just 18% of landlords want to purchase homes in multiple occupation (HMO), down from 29% in the last survey in March, while the proportion looking to expand their portfolios into multi-unit freehold blocks has halved from 19% to 9%.

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