Mortgage lenders are slashing rates on mortgage deals designed for landlords, according to Moneyfacts.
The data analysis site points out that with the buy-to-let sector being under extra pressure thanks to stamp duty changes and recently-announced affordability tests, a sudden rise in mortgage rates would not have been unexpected. However, the opposite has occurred.
The average two-year fixed rate BTL mortgage now stands at 3.32% compared to 3.59% a year ago and 4.03% in April 2014. The average five-year fixed rate for landlords is currently 4% compared to 4.37% in April 2015 and 4.76 in April 2014.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said: “The BTL market has faced intense pressure recently, but despite this, rates have continued to fall across all fixed rates. For example, the average two-year fixed rate has fallen by 0.71% in just two years, while the average five-year fixed rate has dropped by an equally significant 0.76% over the same period.
“While the new rules and stamp duty changes could potentially take the shine off BTL investment, property is often seen as a safe bet, and with rental properties in demand and rent high, BTL remains an attractive proposition.
“A year on from pension freedoms and almost £3bn has been paid out in cash lump sum withdrawals, so it’s highly likely that some of this money has been accessed with BTL in mind. Savings rates are currently so poor that many are looking elsewhere to fund their retirement, so lenders have tried to capitalise on this new pool of cash by offering some of the best rates the BTL sector has ever seen. In addition, providers also cut rates in the run-up to the stamp duty changes in order to attract those keen to buy before they were implemented, which has further aided the downward slide in rates.
“However, while the current pressures on the market are not yet causing rates to rise, borrowers should remember that they will now be facing tighter lending rules, including stricter affordability checks, so it is even more important for potential landlords to seek financial advice to see if BTL really is the right option for them.”