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Buy to let mortgage rates begin to rise as product numbers dip

19 August 2020 | Renting

Buy to let mortgage rates begin to rise as product numbers dip

Independent service Moneyfacts says that while the buy to let mortgage sector remains resilient, it has contracted slightly in recent weeks with rates starting to rise.

Since July 1 there has been a fall of 78 products, leaving 1,660 deals available.

While remaining far below the 2,897 deals offered before the Coronavirus crisis took hold, this is still an improvement on the 1,455 products the market had reduced to as of May 1 this year.

Moneyfacts also says that the stamp duty holiday is offsetting a drop in confidence caused by the descent of the wider economy into the first recession in 11 years.

The service’s mortgage expert, Eleanor Williams, says: “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 per cent 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 August 1, average two and five-year rates have risen by 0.06 and 0.05 per cent respectively – a fact that may prompt some investors to consider their options before these potentially increase further.

“Those borrowers who have a larger 40 per cent deposit or equity will find that average rates have steadily increased since July, with the average two and five-year rates standing 0.53 and 0.45 per cent higher respectively than in March; therefore, those with higher levels of equity may be wise to compare deals carefully.”

Williams says that understandably landlords looking to invest in the BTL sector could see this as a good opportunity, especially if they think that average rates may continue the upward trajectory 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” she concludes.

This post has originally been featured in Letting Agent Today.