Buy-to-let (BTL) product choice reduced month-on-month at the start of August, with a fall of 78 products since the start of July, sitting at 1,660 – but this is an improvement when compared to the low of 1,455 deals available on 1 May 2020.
The average 2 and 5-year rates for all loan-to-value (LTV) brackets are lower now than they were at the start of the coronavirus pandemic, down 0.05% and 0.13% to 2.72% and 3.11% respectively compared to 1 March.
Conversely, 2 and 5-year average rates in the 60% LTV bracket have increased, now sitting 0.53% and 0.45% above where they were in March.
Eleanor Williams (pictured), finance expert at Moneyfacts.co.uk, said: “Over the last six months, the BTL sector has been a little more resilient than the residential market in terms of product choice.
“However, this sector has contracted since 1 July, with a fall of 78 products, leaving 1,660 deals available.
“While remaining some way below the 2,897 deals offered before the crisis took hold, it is important to note that this is still an improvement on the 1,455 products the market had reduced to as of 1 May this year.
“Now that the UK has officially fallen into a recession, some landlords could be concerned regarding the future of their beleaguered sector.
“However, the increase to the stamp duty land tax threshold will have come as welcome news to many landlords and potential investors in the sector, who may be enticed by the potential savings this offers.
“Additionally, recent survey information from ARLA Propertymark indicates that the number of new prospective tenants has risen to a year-on-year high, which could be indicative of the fact that in times of economic uncertainty, people tend to delay making significant financial commitments such as purchasing their own home, which could result in an increase in rental demand.
“Another possible cause for positivity is demonstrated by the overall average rates for two and five-year fixed rate BTL deals.
“These are 2.72% and 3.11% respectively, which means that both rates are lower than they were in March, signifying that there are still competitive deals to be had in this current low base rate environment and an indication of an appetite to lend from providers in this sector.
“However, a note of caution, as since 1 August, average two and five-year rates have risen by 0.06% and 0.05% respectively – a fact that may prompt some investors to consider their options before these potentially increase further.
“5-year fixed rate deals have remained particularly competitive, with both the average for all LTVs and the higher-risk 80% LTV bracket remaining 0.13% and 0.11% lower than the equivalent March rates.
“Those considering a new BTL mortgage deal may wish to lock into one that can offer longer-term payment stability and protection from future interest rate volatility.
“Conversely, those borrowers who have a larger 40% deposit or equity will find that average rates have steadily increased since July, with the average 2 and 5-year rates standing 0.53% and 0.45% higher respectively than in March; therefore, those with higher levels of equity may be wise to compare deals carefully.
“Landlords looking to invest in the BTL sector could see this as an opportune time to explore their options, especially if they think that average rates may continue the upward trajectory we have witnessed over the last two months.
“However, economically, we remain in unchartered waters, with many providers exercising caution in their underwriting, so landlords or potential investors should ensure they thoroughly research and plan ahead in order to protect their investments.
“In these ever-fluid times, seeking advice and support from independent, qualified professionals could be invaluable in navigating their choices.”
Kevin Roberts, director at Legal & General Mortgage Club, said: “The buy-to-let market has seen its fair share of challenges in recent times, but it’s an area where we are now seeing increased activity from consumers since the lockdown eased.
“Data from Legal & General Mortgage Club’s SmartrCriteria tool, which tracks product searches by mortgage advisers, has shown buy-to-let enquiries increase by two and half times between April and July this year.
“Not only are we seeing more existing landlords expanding their portfolios, but new ‘part-time’ landlords are also looking to take advantage of the recent stamp duty holiday to step into buy-to-let.
“Searches by advisers for mortgages for first-time landlords have increased four-fold since April and In many cases, these individuals are seeking out guidance from independent mortgage advisers ensure they are finding the best mortgage deal.
“As thousands of Britons plan staycations for the foreseeable future, we are seeing a resurgence in the holiday let market too.
“Searches for mortgages on AirBnB style ventures have risen to be the second highest buy-to-let search criteria by advisers, as investors look to take advantage of Brits staying the UK for their holidays.”