Competitive Five-Year Fixed Rate Deals are Being Snapped up by Landlords

The latest research from the Buy to Let Club reveals that many landlords are considering five-year fixed rate mortgages. With the general decrease in cost of longer-term products and the stringent affordability checks involved with the short-term alternatives, many are finding the longer commitments more tempting.

The analysis that the Buy to Let Club undertook shows that 42% of its landlord costumers are opting for the five-year fixed rates. This is up from 15% two years ago, before the Prudential Regulation Authority (PRA) brought in stricter stress testing. With the economy as it stands, it appears that landlords are eager to lock in to fixed terms with the aim of a more long-term guarantee in case of further changes.

With five-year fixed terms currently sitting at a record low, many landlords are finding them to be the more appealing choice. Looking at the average fixed rate of five-year buy to let products during 2008-2013, those at 75% loan-to-value had shown a fluctuation of 5% to 7%. The products available today sit considerably consistent at less than 2.7%.

Research has also been released from online mortgage broker Property Master, showing that many popular buy to let fixed rate deals have continued to fall since the start of the year. Similar to the information from the Buy to Let Club, its Mortgage Tracker has determined that five-year fixed rate mortgages remain the most competitively priced of those recorded.

The tracker’s data has revealed that the monthly repayment for a five-year fixed rate loan of £150,000, representing 65% of the value of the property, has fallen by £22.00 a month, compared with January this year. Landlords borrowing the same amount for 75% of the property’s value are paying £16.00 less per month compared to if they had taken out that loan in January.

Ying Tan, managing director of Buy to Let Club, said: “We’ve seen a steady increase in the number of clients opting for five-year fixed rates over the last few years.

“With extremely competitive rates and the added security that they present, it is not surprising that they are a popular option for investors.

“Of course they also have the added benefit of less stringent affordability tests that make them appealing for raising finance against low-yielding properties.

“We have a number of fantastic five-year rates at present including a brand new exclusive with Santander at 2.54% with a £1,999 fee up to 75% LTV that is available for both purchases and remortgages.

“Principality’s 2.55% rate and Virgin Money’s 2.64% rates at the same LTV are also proving popular.”

Angus Stewart, Property Master’s Chief Executive, commented: “Landlords are benefiting from increased competition in the mortgage market for their business – recent research revealed there are now over 2,000 different buy-to-let products available.  They are also probably benefiting from the market’s expectation that if the base rate does go up it is more likely to do so later in the year rather than now.  The feeling is there is a lot of uncertainty around at the moment in terms of the future direction of Brexit coupled with weak economic data.  But the Bank of England meets again next week and it could always surprise us.”