More Optimism In Buy-To-Let Market

March 17, 2023

The buy-to-let (BTL) mortgage market is showing signs of a recovery after experiencing a rocky road over the last few months. After the shock of Liz Truss’ mini-budget of September 2022 that sent BTL mortgage rates soaring there are signs of green shoots, Landlord Today reports.

There are now more BTL mortgage products available at any point since last July across fixed terms of two and five years and of variable tracker rates. Average rents in the UK are also rising at record rates in some areas, as demand for rental properties continues to outstrip supply. This makes BTL properties a lucrative investment choice. 

Rachel Springall, Moneyfact’s finance expert, commented: “It is encouraging to see buy to let product choice gradually recover from the shock surrounding the fiscal announcement.”

She added: “The choice of deals to landlords plummeted and both the average two and five-year fixed rates rose to 6.0 per cent towards the tail end of 2022, but thankfully, both rates have slowly dipped below this level. There are now 2,400 deals for landlords to choose from, up from just 988 in October 2022, thanks to consecutive months of growth.”

“The drop in average buy to let rates appear more subdued than seen within the residential mortgage sector, but lenders have made moves to entice new business despite some investors’ concerns surrounding rental income margins.”

There has also been an increased demand for holiday lets, which began during the Covid pandemic, but hasn’t eased off despite international travel restrictions being lifted in most places. Holiday lets can command much higher rental yields than standard rental properties, although the demand can be seasonal. 

Holiday lets are commonly found near coastal resorts in the UK, and good properties can be hard to source. However, there is a growing demand for holiday lets in less traditional locations such as inner cities, driven by the rise of Airbnb and people who want weatherproof attractions such as city museums and theatres to visit on holiday. 

Giving advice for potential BTL and holiday let landlords, Springall said: “As both the average two- and five-year fixed rates sit above 5.0 per cent, compared to around 3.0 per cent a year ago, it’s clear that landlords are likely to see their monthly repayments much higher than they perhaps anticipated.”

“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.”

“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.”

If you are considering a BTL purchase but have non-standard financial circumstances, it may be beneficial to seek the advice of buy to let bad credit mortgage brokers.

Your home may be repossessed if you do not keep up with your mortgage repayments.

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