Mortgages  

Buy-to-let borrowers backing shorter-term fixes

Buy-to-let borrowers backing shorter-term fixes

Research from specialist broker Mortgages for Business showed that during the final quarter of 2014, the proportion of property investors favouring two-year fixed rates nearly doubled since the start of last year, up to 23 per cent from 12 per cent in Q1.

By contrast there was a decline in the proportion of landlords who would choose longer term fixed rates, with just 15 per cent preferring three-year fixed rate products, down from 21 per cent.

This is despite separate figures this week showing the number of longer-term fixes of 10 years is increasing rapidly, with data from Moneyfacts revealing there are now 77 mortgages on the market with a rate fixed for a decade, compared to just eight in January 2014.

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David Whittaker, managing director at Mortgages for Business, said that these “ultra-competitive” mortgage rates will probably continue for some time due to increasing predictions of virtually zero inflation in the UK and eurozone, plus a cooling rate of economic growth.

“That doesn’t mean there’s no room for caution. Even in such an exceptional situation, rates are still expected to rise in due time. However, landlords now seem willing to take the chance that won’t happen for at least a couple of years.

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

Elsewgere, figures showed remortgaging was the strongest sector of last year’s valuation market, with Connells Survey and Valuation predicting this will continue into this year.

December finished the year with 9 per cent year-on-year growth in valuations activity, according to the firm, although on a monthly basis total valuations dropped 17 per cent.

John Bagshaw, corporate services director at Connells, explained that in recent months the housing market has bounced back despite fears of a cooling market in the autumn.

“This latest increase in valuations activity does contrast with more rapid expansion recorded earlier in 2014; but a more balanced and sustainable pick-up bodes well for 2015.”

Remortgaging valuations on a monthly basis only fell 7 per cent, however there was a 25 per cent surge year-on-year to December 2014.

Mr Bagshaw said that remortgaging has wind in its sales as we enter 2015. “With the bank rate set to remain at its historic low for some time, lenders will probably be able to offer even more competitive rates very soon.”

First-time buyer activity also saw significant annual growth, with the number of valuations for first time buyers increasing by 9 per cent on an annual basis, despite the fact that valuations dropped by 16 per cent compared to the previous month.

By contrast, the buy-to-let sector of the market saw one of the biggest falls in activity both on a monthly and annual basis. Compared to November, activity fell 33 per cent, while on an annual basis it was down 9 per cent.

peter.walker@ft.com