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.