Greater mortgage choice for landlords

After last autumn’s mini-Budget, people looking for a buy-to-let mortgage faced less choice and higher rates, just like in the wider residential mortgage market. But the situation is continuing to improve, with more products coming on to the market and rates falling.

The mini-Budget in September — which included £45bn of unfunded tax cuts — led to turmoil on the financial markets, a fall in the value of the pound and an increase in the cost of UK government borrowing, with a knock-on impact in the mortgage market in the form of a mass withdrawal of residential and buy-to-let mortgages and escalating mortgage rates.

Mortgage availability

Since then, confidence among lenders has increased and there has been a gradual recovery. The latest analysis by financial information website Moneyfacts reveals that 2,400 different buy-to-let mortgages are available from UK lenders — the highest count since July 2022.

At the lowest point, in October 2022, lenders were offering only 988 buy-to-let mortgages.

Buy-to-let rates

Borrowing costs are still higher than they were, particularly for those looking to remortgage at the end of a longer-term fixed rate deal. But rates are slowly coming down.

After rising to 6% towards the end of 2022, the average two- and five-year fixed rates have now dipped below this level. As of March, the average two-year fixed deal stands at 5.81% while the average five-year fixed deal sits at 5.72%, Moneyfacts found.

While this downward movement is undoubtedly good news, the same deals were around 3% a year ago.

Stress test

Specialist broker Mortgages for Business has warned that as many as one in three buy-to-let investors are finding it harder to remortgage after failing their lender’s affordability test due to the higher repayments.

Borrowers may be able to choose a ‘product transfer’ to a new deal without having to pass a new stress test. Otherwise, they face seeing their loan revert to the lender’s standard variable rate, which tends to be much higher, or having to pay a hefty fee to secure a more reasonable interest rate.

‘Wise to seek advice’

“Landlords may be waiting for fixed mortgage rates to come down further or indeed opt for a tracker mortgage to give them more flexibility to eventually switch their deal,” said Rachel Springall, finance expert at Moneyfacts.

“However, interest rates are only part of the decision-making process when entering a buy-to-let investment. Whether that be for new or existing landlords, it is always wise to seek advice to ensure it is the right time to commit to a deal.”