Buy-to-let mortgage choices on the increase again

Buy to let mortgage choice has increased for the fifth month in a row, according to independent mortgage market monitor Moneyfacts.

There are now 2,333 BTL products available - that is 88% of the number available before the start of the pandemic. This contrasts with the owner-occupier mortgage choice which is improving but is still only 68 per cent of its pre-pandemic level.

But Moneyfacts says: “As the level of product choice has returned, rates have also continued to climb, with both the average two and five-year fixed rates for all Loan-to-Values higher than the same rates year-on-year.”

“The only LTV tier where average fixed rates did not increase this month was at 60% LTV, where both the two and five-year average fixed rates fell by 0.38 per cent and 0.27 per cent respectively, which may be good news for those with 40% equity or deposit.”

Proceed with caution and do get advice

Specialist buy-to-let brokers and accountants up and down the country are urging buy-to-let landlords to tread with caution and seek appropriate advice before jumping into incorporating their property business into a limited company.

The reduction in mortgage interest tax relief and the introduction of stamp duty are two relatively recent initiatives that have resulted in some landlords reassessing their property businesses and deciding to incorporate.

Lenders are predicting there will continue to be a growing trend towards limited company buy-to-let activity this year. But they warn this may not be the best practice for everybody.

Quality rental properties in high demand

A recent survey by high street estate agents is showing an extremely high demand for good condition rental properties. One agency in the Midlands area reported a 17% increase since January of clients waiting for suitable properties to come onto the market. The demand is growing it would seem nationwide with London and the surrounding areas reporting severe shortages of suitable properties to rent.

The shortage is due to young couples being unable to raise the deposits required to buy their own homes and consequently they go for renting. Mortgage companies are doing all they can to attract the first-time buyer but the restrictions applying to applications is having a negative effect. Interest rates remain the lowest they have been for years, but this still is not helping as the deposit required is hard to accumulate.

This situation is only good news for the landlord as rents continue to increase year on year as demand for properties grow. One thing which is clear in the survey is that rental properties have to be of a good standard to demand the high rents being charged.

Buy-to-let mortgage demand is increasing rapidly

Lenders are expecting more activity in the but-to-let market in 2021 than this time last year.

A survey by the Bank of England stated 60% of lenders expected demand to grow over the coming months. All the early signs this year show they are correct as demand is up 27% on the same period last year.

It is thought that as 2021 progresses applications will slow but both lenders and borrowers alike are confident of the future.

Mortgage providers are keen to point out that there are many very good deals in the marketplace both fixed and variable rates.

Even with all the changes to buy-to-let taxation it is expected to be a strong year of growth for the buy-to-let mortgage sector. House prices in the UK continue to rise at a rapid rate thus making it exceedingly difficult for the first-time buyer to get onto the property ladder.