The products are offered at a rate of 1.14 per cent for up to 60 per cent loan-to-value (LTV) and 1.34 per cent for 70 per cent LTV and are expected to appeal to existing landlords looking to remortgage to a better deal.
The lender said borrowers with an illustrative £250,000 mortgage and a rate of 1.53 per cent could save up to £1,344 in repayments over two years when opting for its lower rate product, assuming there were two base rate increases of 0.25 per cent each in August 2019 and 2020.
Jaedon Green, director of product and distribution at Leeds Building Society, said: "These shorter-term discount mortgages offer market-leading rates and a package of incentives.
"Widening our range of discounted residential mortgages was well-received so we’ve seen that there’s an appetite for variable rate deals – with the potential for lower monthly repayments than equivalent fixed rate mortgages – among borrowers who don’t expect interest rates to increase significantly in the near future.
"We may be in a rising rate environment but the Bank of England has suggested any base rate increases will be small and gradual, in recognition of the fact that rates have been at historically low levels for the last decade."
The lender said it was also responding to recent tax changes in the buy-to-let space, which were still being felt by investors.
Mr Green said: "The past couple of years have seen a lot of change for landlords, with the introduction of new rules for portfolio landlords and wide-ranging tax changes, the impact of which is still being felt.
"For that reason we know landlords need to take a far more active role in managing their portfolio to maximise yield and making sure they have the best deal on their mortgage finances."
In April 2016 the government added a 3 percentage point stamp duty surcharge for private landlords and a year later removed tax relief on mortgage interest for higher rate tax payers.
The latest Budget reformed lettings relief so it only applied in circumstances where the owner of the property was in shared occupancy with the tenant.
In October Leeds BS launched three two-year discount mortgages starting at a headline rate of 0.99 per cent.
Peter Gettins, product manager at L&C Mortgages, said the products reflected a modest shift towards variable rates in the wider market following a period of low interest rates which had seen little price difference between variable and fixed rates.
He said: "We’ve recently seen a that gap start to open up again and these Leeds discounts are a good illustration of that.
"They do have a big £2,499 fee, but it’s not out of step with the rest of the BTL market considering where the rates are pitched, and the free valuation & legal work for remortgages are valuable features.
"What really stands out to me is that they actually undercut Leeds’ residential discounts which start at 1.47 per cent. Not withstanding the lower (£999) fee, that is quite exceptional in itself."
But Mr Gettins suggested the low rate and high fee meant the deals were best suited to larger loans of above £250,000.
He said: "The main issue I see is that loans of this size can struggle to meet the stressed rent requirements – though Leeds does at least ease it a bit for pound to pound remortgaging."
He added: "A potential negative for landlords is that early repayment charges apply within the discount period. Often with a variable rate, especially one set at the lender’s discretion, borrowers prefer the ability to get out should rises become excessive.
"That said, the way these deals are pitched should attract those best able to cope with any increases, and I’m sure they’ll be attractive to many landlords – especially in high value areas."
carmen.reichman@ft.com
