The buy-to-let sector is showing signs of recovery as average fixed rates decrease and the number of available products rises, new data from Moneyfactscompare.co.uk reveals.
Currently, landlords have more than 2,500 mortgage options to choose from, a significant uptick from less than 1,000 a year ago.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, provided details on the market’s performance: “The buy-to-let market has seen a healthy growth in product choice month-on-month and fixed rates have fallen over the same period.
“These are encouraging signs for landlords looking to refinance who may have been concerned about rates escalating.”
Despite the overall positive trend, the data also indicates that landlords coming off 2-year or 5-year fixed rate deals should prepare for higher mortgage repayments.
The average rate on a 2-year fixed mortgage has risen to 6.40%, more than double the 2.92% recorded in October 2021. The average 5-year fixed rate also rose, standing at 6.32%, up from 3.40% in October 2018.
Springall cautioned landlords about the changing landscape: “Despite such positivity, some landlords may seriously be considering selling up, as the profitability of a buy-to-let portfolio may not be enough to cover costs.
“Over the years, landlords’ profit margins have been hit by a cull in mortgage rate tax relief, tax changes for capital gains tax and holiday lets, plus new energy performance certificate requirements.”
A study by Hamptons supports these concerns, indicating a 12% increase in rental growth for newly let properties across Great Britain.
While this may seem enticing for new landlords, Springall advised caution: “The months ahead for the buy-to-let sector are crucial, so any investor would be wise to seek advice before they commit and be conscious of any rental expectations amid rising costs.
“Providers will need to carefully balance supporting their existing customers and work hard to entice new business to encourage an optimistic outlook for investors in the months ahead.”
