Fixed rates remain the most popular option for buy-to-let (BTL) remortgage borrowers, but the gap between a 2-year or 5-year preference is closing, according to the Landbay landlord survey.
The survey found that 79% of landlords expected to opt for a fixed rate when remortgaging.
Four out of 10 landlord respondents (40%) said they would take a 5-year fixed rate, down from 46% last December and significantly lower than 68% in August 2022.
Almost a third of landlords (32%) said they would opt for a 2-year fix, up from 24% (December 2022) and 13% (August 2022).
Landbay said that the change in sentiment towards 2-year and 5-year BTL fixed rates partly stems from the fall out of Liz Truss’ mini-Budget last September, when rates rose sharply.
Other contributory factors include the volatile economy and the cost-of-living crisis, fuelled by high inflation leading to rising interest rates.
The penchant towards 2-year terms by a rising number of landlords is largely due to the widespread perception that mortgage rates will reduce in the next couple of years as inflation heads back towards the Government’s 2% target.
In addition, 2- and 5-year fixed rates have been fairly close in recent months and some landlords don’t want to commit to a 5 year deal if they think rates might come down.
Paul Brett, managing director, intermediaries at Landbay, said: “It’s interesting to see that there has been a rise in the number of remortgaging landlords considering 5-year fixed rates and a drop in those opting for 5-year fixes.
“No one knows where rates will go but many of our survey respondents are hoping to see a fall within two years.”
He added: “With more borrowers considering short-term fixed rates when remortgaging, Landbay has listened to the market and introduced a suite of 2-year fixed rate like-for-like remortgage products.
“They come with the added advantage of a lower interest cover ratio (ICR) stress test to help with affordability.
“As long as landlords are borrowing the same as their current mortgage, the remortgage stress test will be at pay rate plus 1% instead of the standard calculation of pay rate plus 2%.”
