The choice of buy-to-let mortgages has never been higher
With all the new legislation that has impacted on landlords in recent years, from changes in taxation to rules regarding letting fees, it’s encouraging to see that the number of buy-to-let mortgages on the market has hit its highest level for over a decade.
There is now a broad selection of mortgages for buy-to-let investors to choose from as lenders compete for their business.
An impressive number of buy-to-let mortgage products
According to independent mortgage market analyst Moneyfacts, there are currently 2,162 buy-to-let mortgages available. This is the highest number since October 2007 when there were 3,305 products available.
- In March 2017, there were 1,456 buy-to-let mortgages available with an average two-year fixed rate of 2.96% and an average five-year fixed rate of 3.77%.
- In March 2018, there were 1,765 buy-to-let mortgages available with an average two-year fixed rate of 2.96% and the average five-year fixed rate of 3.43%.
- In March 2019, there were 2,162 buy-to-let mortgages available with an average two-year fixed rate of 3.12% and an average five-year fixed rate of 3.61%.
Rental income and affordability
However, this competition between lenders to offer buy-to-let products hasn’t led them to drop interest rates in the same way they have for the residential mortgage sector. This might be because of the differing levels of risk associated with mortgage loans.
Whereas residential mortgages are assessed primarily on the borrower’s income and affordability, buy-to-let mortgages are based on the potential rental income as well as affordability.
Changes in the buy-to-let market
Buy-to-let landlords now have a wider choice of mortgages than at any time in the last 12 years. What this shows is that despite recent changes in taxation and an uncertain property market, there is still a vibrant letting market.
Both lenders and property investors have had to adapt quickly to legislative changes that have happened in quick succession.
For example, lenders now apply stricter standards to those with four or more properties according to Prudential Regulation Authority (PRA) landlord borrowing rules. This means that as well as an increase in the number of buy-to-let mortgages currently available, there are also different products to accommodate different types of buy-to-let borrowers.
The data from Moneyfacts also revealed that the number of limited company buy-to-let mortgages has increased.
Charlotte Nelson from Moneyfacts commented, “The buy-to-let market has seen quite a rollercoaster ride over the past year, including multiple changes that have required both landlords and providers to rethink their options. Amid this upheaval, the market has seen many landlords and aspiring landlords take a step back to assess their options and figure out whether they are making the right choice. As a result, buy-to-let providers are now competing for a smaller pool of customers. Offering variety in their range is one way in which they can compete. While it has been a tough time for the BTL market, the fact that the number of available deals is still growing shows it is still a viable option.”
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