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Signs of growth in buy-to-let market

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Number of mortgages available to landlords rises in October as fixed rates fall, signalling positives signs for the sector.

 

The buy-to-let market has seen healthy growth over the last month, with the number of products available to landlords on the rise.

According to data by Moneyfacts, the number of mortgages available to landlords has improved month-on-month by just over 100 deals. There are now over 2,500 options available. At the same time, average fixed rates have fallen over the same period for both two and five-year fixed terms.

Those coming off a two or five-year fixed rate deal will still need to find more funds for the higher mortgage repayments, with the latest average rates around 3% higher, but these are encouraging signs for landlords looking to refinance, says Knight Frank Finance buy-to-let expert Huy Le.

“Following a period of relative economic stability, we have seen swap rates come down, which is positive for anyone looking to remortgage their home or their buy-to-let property as this directly impacts the current fixed rate products that lenders can offer,” he says.

“What’s more important in the buy-to-let sector, however, is that this period of stability is giving buy-to-let lenders the confidence they need to reduce their stress testing criteria, which is used to assess the affordability of a loan for a landlord.”

Huy explains how lenders base their stress test rate (which is applied to test affordability in the event of interest rate rises) on the interest rate of the day.

“In today’s market, the best rental stress test is around 4.7%, which has improved from earlier this year when it was over 6%,” he says. “This means landlords are able to borrow a bit more than they could a few months ago.”

It comes at a time when landlords’ profitability is being stretched, with profit margins hit by a cull in mortgage rate tax relief, tax changes in Capital Gains Tax and holiday lets. Many landlords had started and continue to invest in costly energy efficiency EPC requirements despite the fact the legislation has been pushed back by UK prime minister Rishi Sunak.

Huy says landlords looking to find out more should seek advice before they commit to a deal. “While this will be positive news for many across the buy-to-let market, it’s vital landlords understand which options are most suitable for them in the months and years ahead, so it’s always worth taking the time to reach out to a specialist broker.”

 

If you are looking to refinance and would like to explore which products would work best for you, speak to our buy-to-let broker Huy Le, who will be able to help you identify the best financial approach for your circumstances.

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Mortgage Advice. The choice of interest rate and product terms will depend on your circumstances and the amount of the mortgage. Before you make a mortgage application, we will carry out a full review to establish your needs and preferences and if you meet the criteria, we will give advice and make a recommendation to you. We do charge a fee for mortgage advice. All mortgages are subject to status. Please note that all products show an indicative rate only and may not be suitable for you. You must be 18 or over.

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Knight Frank Finance LLP is a limited liability partnership registered in England and Wales with registered number OC322399. The principal office of Knight Frank Finance LLP is situated at 55 Baker Street, London W1U 8AN. Knight Frank Finance LLP is authorised and regulated by the Financial Conduct Authority under Financial Services Register number 459093.