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The continuous rate-slashing seen across mainstream residential mortgage deals has now spread to the buy-to-let sector, with investors set to benefit as lender competition intensifies.
The buy-to-let (BTL) mortgage market is currently enjoying a post-pandemic growth as a blend of historic low rates, rising house prices and increased rental demand has encouraged lenders to reach out to would-be investors with a wider range of competitive low-rate deals – the highest number of BTL mortgages available since 2007 according to Moneyfacts. Read on to discover what exactly is happening in the BTL mortgage market and how it could help you build your portfolio.
Whilst the BTL mortgage market has seen a positive recovery over the past six months, it’s fair to say that changes in the residential mortgage market post-lockdown have been more rapid, or have at least been more noticeable – helped in large by significant press coverage of the government’s 95% loan-to-value ‘Mortgage Guarantee Scheme’ and sub 1% rates in an effort to throw a lifeline to first time buyers – who had been out priced of the market when lenders essentially shut up shop on low-deposit lending.
It now looks as though the lender rate war has finally caught up with buy-to-let landlords however, with average BTL two-year fixed rates dropping by 0.03% and 0.04% for five-year fixed deals. This puts average two-year fixed BTL deals at 2.94% and five-year fixed deals at 2.35% – the lowest it’s been since the start of the year according to Moneyfacts. The Mortgage Works and Platform are just two of the many BTL lenders who are currently offering attractive low rate two-year fixed deals to investors who don’t own through a limited company.
As with the residential market, these low rates are a by-product of increased competition amongst lenders, all striving to offer the best BTL deal after a lull of activity at the beginning of the year. As more and more lenders join the fray, constantly out pricing each other on rate, landlords are seeing an influx of products to choose from. Low rates equals increased completion which in turn equals greater availability, meaning investors are spoilt for choice. Moneyfacts.co.uk data suggests the number of deals at the beginning of September this year was 2,968 – nearly twice as many as September 2020 and the highest since their records began in 2007.
Interestingly, the rate gap between buy-to-let and residential mortgages has also started to close in recent years as more lenders enter the market – with BTL deals historically being much higher. The main difference between the two now however is in the high loan-to-value (LTV) space. Although lenders are willing to offer enticing deals to residential first-time-buyers with low deposits, they seem reluctant to take on these risks for landlords with low equity or only a 15% deposit. In some cases BTL mortgage rates at 85% LTV (the maximum) have even seen an increase. This suggests that the best low-rate deals for investors are to be had in the 60-65% LTV bracket.
At some point the Bank of England will look to raise the base rate from the current historic low of 0.1%. This change will likely ripple through the mortgage market as lenders are forced to increase their product pricing to remain viable. If you’re coming to the end of a fixed deal soon it’s therefore important to consider speaking to a professional who can advise you on your options including an explanation of the costs involved. Countrywide Mortgage Services can compare hundreds of BTL mortgages to find the best deal for your portfolio, including a review of your insurance and personal protection.
A fee will be payable for arranging your mortgage. Your Consultant will confirm the amount before you choose to proceed.
Countrywide Mortgage Services and Countrywide Insurance Services are trading names of Countrywide Principal Services Ltd which is authorised and regulated by the Financial Conduct Authority (Firm Registration Number 301684). Registered Office: Countrywide House, 6 Caldecotte Lake Business Park, Caldecotte Lake Drive, Milton Keynes, MK7 8JT. Registered in England no. 01707341.
Mortgage rate war reaches buy-to-let landlords - https://www.ft.com/content/7ca4eb27-508f-4b9d-bf37-49fa85a94e5f
Buy-to-let product choice and affordability improving - https://propertyinvestorpost.com/buy-to-let-product-choice-now-ahead-of-pre-pandemic-total/
BTL mortgage rates fall to lowest point since January - https://moneyfacts.co.uk/news/mortgages/btl-mortgage-rates-fall-to-lowest-point-since-january/
Mortgage borrowers urged to lock into new deal as rates continue to fall - https://moneyfacts.co.uk/news/mortgages/mortgage-borrowers-urged-to-lock-into-new-deal-as-rates-continue-to-fall/