There’s been a dramatic short-term improvement in the number of mortgage products available for buy to let landlords.
The independent mortgage market monitor Moneyfacts says overall buy to let product availability (fixed and variable) has risen by over 700 options since the start of Octobe. However, even so there remains 300 fewer deals than at the start of September, before the catastrophic mini-Budget delivered by Liz Truss and Kwasi Kwarteng.
Moneyfacts financial expert Rachel Springall says: “The buy to let sector has faced notable market turmoil, so it’s positive to see product choice gradually returning since the start of last month. A rise in choice could indicate an encouraging sentiment across lenders that appear to be adjusting their ranges to cater to landlords searching for a new deal.
“The cost for locking into a new fixed deal has risen since the start of October, and the overall average buy to let fixed rates across both two- and five-year terms sit above 6.0 per cent.
“So, despite product choice starting to return, landlords will be paying higher interest rates than if they secured a deal just eight weeks ago. There are high expectations that interest rates will come down in the weeks ahead, so it would not be too surprising if landlords wait a little longer before they refinance, particularly as we approach the end of the year.”
Springall adds that prospective landlords assessing the potential returns by investing in buy to let may be concerned about their profit margins due to rising interest rates and the cost of living, and that any investor will need to carefully balance their rental expectations amid rising costs as it is difficult to tell how the sector could be impacted moving into 2023.
She concludes: “However, since January 2020, rents have risen 19 per cent across Great Britain, equating to an extra £2,351 a year for tenants, according to a study by Hamptons. It’s essential any potential borrower seeks independent financial advice before entering any arrangement to ensure it’s the right choice for them.”
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Nice I guess… but I’m out anyway, so no new products needed.
Mortgage interest rates need for BTL to come back down nearer to base rate or there will be a lot more landlords selling up and a lot more homeless people.
One of mine is on a tracker and has increased 7 times this year. The payments are now 3 times as much as they were this time last year. I have no idea how many more times the BoE will increase the base rate.
I've got 5 fixes ending in 2023. It's a few weeks too early to set anything in motion right now but at today's rates they're looking like the monthly payments will increase by between about £500 and £1500 a month on some of them depending on if I risk a tracker or discount rate or want the certainty of a fix. Some of the product fees are around 3%.
With increases of that magnitude it's going to be a straight choice of significant rent increases or a Section 21 for hundreds of thousands of tenants.
Section 24 makes the problem even worse.
I'm probably in a better position than a lot of landlords, as I'm not over leveraged, have several HMOs and have a few unencumbered rentals, but it is going to be painful. For anyone up around 75% LTV with vanilla tenancies it's questionable if they will survive the new interest rates.
Especially if they then have to make EPC improvements or pay for selective licensing.
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