Buy-to-let  

Landlords urged to act as rates begin to rise

Landlords urged to act as rates begin to rise

Buy-to-let landlords have been urged to consider their options amid concerns rates could be rising during the recession.

Data provider Moneyfacts said rates on many of the products are still lower than they were in March but the fact the country has entered its first recession in 11 years could spell change ahead.

According to Moneyfacts the average two- and five-year fixed rates for all LTV tiers are already up by 0.06 percentage points and 0.05 percentage points respectively compared with the beginning of the month.

However, the rates, currently at 2.72 per cent and 3.11 per cent on average respectively, still remain lower than at the start of March, before lockdown.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “[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 per cent and 0.05 per cent respectively – a fact that may prompt some investors to consider their options before these potentially increase further.”

Ms Williams said five-year fixed rate deals remained particularly competitive, with both the average for all LTVs and the higher-risk 80 per cent LTV bracket remaining 0.13 percentage points and 0.11 percentage points lower than the equivalent March rates.

Conversely, two and five-year average rates in the 60 per cent LTV bracket had increased, now sitting 0.53 and 0.45 percentage points above where they were in March,

She said: “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.”

PRODUCT NUMBERS

Mar-20

Jul-20

Aug-20

17 Aug '20

BTL product count - fixed and variable rates

2,897

1,738

1,720

1,660

Two-year fixed rates BTL - all LTVs

914

625

625

596

Five-year fixed rates BTL - all LTVs

1,000

644

631

612

AVERAGE RATES

Mar-20

Jul-20

Aug-20

17 Aug '20

BTL two-year fixed - all LTVs

2.77%

2.61%

2.66%

2.72%

BTL two-year fixed - 80% LTV

3.56%

3.18%

3.51%

3.58%

BTL two-year fixed - 60% LTV

1.89%

2.28%

2.35%

2.42%

BTL five-year fixed - all LTVs

3.24%

2.97%

3.06%

3.11%

BTL five-year fixed - 80% LTV

3.98%

3.82%

3.82%

3.87%

BTL five-year fixed - 60% LTV

2.31%

2.65%

2.73%

2.76%

Data shown is as at first working day of month, unless otherwise stated.     

Source: Moneyfacts.co.uk

At the same time the number of BTL products available yesterday (August 17) fell to 1,660, from 1,720 at the start of the month.

On top of this, Kevin Roberts, director at Legal & General Mortgage Club, said its data showed buy-to-let enquiries had increased two-and-a-half times between April and July.

Mr Roberts said: “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 to ensure they are finding the best mortgage deal.”

A recent Rics survey also pointed to market sentiment being on the up.

The July 2020 RICS UK Residential Survey saw 6 per cent more respondents report an increase in new buy-to-let property coming to the market in the past three months than did not.

This means surveyors are seeing landlords starting to come back or existing ones purchasing more properties.

chloe.cheung@ft.com