New lenders and new deals mean that the buy-to-let mortgage freeze is finally starting to thaw.
Like all mortgage borrowers many buy-to-let landlords have benefitted from interest rates being at a record low for the last 20 months. But like the rest of us they have also faced reduced choice and tighter lending criteria.
In fact, the mortgage squeeze has been more severe in the buy-to-let sector than anywhere else. From peak to trough the number of available buy-to-let deals fell by a staggering 95%.
Thankfully the number of mortgages is now back on the up, in fact it has virtually doubled in the last 12 months, according to financial information provider Moneyfacts. It says that there are now 306 mortgages available to landlords, compared to 3,648 in July 2007.
Growing competition
And there has also been a spate of lenders launching or relaunching into the sector in the last year. At the worst of the credit crunch, buy-to-let specialist lenders shut up shop in their droves, but they are slowly returning, providing some much-needed competition to the market.
This time last year there were 45 active buy-to-let lenders compared to 54 today. Paragon, Kensington and Darlington Building Society have all re-entered the sector in the last few months.
The number of mortgages at higher loan-to-value ratios has also grown as a result of the number of deals doubling. By far the biggest change can be seen for those landlords with just a 20% deposit, which have quadrupled in the last year, from four products in October 2009 to 12 products in October 2010.
Buy-to-let deals for those with 25% upfront have seen an increase of 52%, jumping from 65 to 99 in the last year. This is particularly good news for those landlords with less equity in their properties, some of whom had effectively been mortgage prisoners, unable to refinance to a better deal.
Blue skies ahead
A recent study by Paragon Mortgages shows that mortgage brokers are aware of this increased availability of deals, and they expect things to get even better for their landlord clients.
Nearly half of mortgage brokers surveyed (43%) reported an improvement in the availability of buy-to-let mortgages during the third quarter of 2010, with 38% noting no change and a significant minority believing that availability had actually worsened.
It’s worth pointing out that while overall availability has improved, moves to limit buy-to-let lending or tighten criteria by Lloyds Banking Group earlier in the summer and Platform last week, may have contributed to the number of brokers who think things have actually got worse.
But the overall situation is improving and, even better, a significantly higher proportion of mortgage advisers believe buy-to-let mortgage availability will improve further during the next quarter (35%) than deteriorate (7%).
What about rates?
It’s a mixed picture for landlords when it comes to interest rates. Those looking for the safety of a fix will be pleased to know that average buy-to-let fixed rates have fallen in the last year, from 6.01% in October 2009 to 5.49% in October 2010.
John Fitzsimons highlights three things to consider if you’re planning a buy-to-let investment
But over the same period variable rate mortgages have actually risen from 4.5% to 4.74% according to Moneyfacts, despite the Bank of England Base Rate remaining steadfast at its record low of 0.5%.
In general, it is good news for landlords that the mortgage market is very slowly catching up with the positive developments in the private rented sector.
Tenant demand and actual rental income have been increasing all year, and are both at record highs, yet many landlords have been frustrated from expanding their portfolios due to a lack of available mortgage finance.
No one is saying that the problem has disappeared, as the lack of mortgage funding is still one of the biggest factors affecting the sector, but things are getting better, and this step in the right direction can only be welcomed.
More products, more deals at higher LTVs and lower fixed rates suggest that landlords should look again at their switching options in order to bag a decent mortgage before interest rates rise.
Below are some of the best buy-to-let deals on the market right now.
15 fab fixed rates
|
LENDER |
TYPE OF DEAL |
RATE |
FEE |
MAX LTV |
|
2-year fix |
3.99% |
3.5% |
60% |
|
|
2-year fix |
4.49% |
3.5% |
70% |
|
|
2-year fix |
4.69% |
3.5% |
75% |
|
|
2-year fix |
4.78% |
£1,495 |
65% |
|
|
2-year fix |
4.69% |
£999 |
60% |
|
|
2-year fix |
4.80% |
2% |
75% |
|
|
2-year fix |
4.99% |
2.5% |
75% |
|
|
2-year fix |
5.19% |
3.5% |
80% |
|
|
3-year fix |
5.29% |
£1,495 |
75% |
|
|
3-year fix |
5.29% |
£1,495 |
75% |
|
|
2-year fix |
5.30% |
2% |
65% |
|
|
2-year fix |
5.45% |
1.25% |
75% |
|
|
5-year fix |
5.69% |
£1,549 |
60% |
|
|
5-year fix |
5.79% |
3.5% |
75% |
|
|
5-year fix |
5.89% |
£1,495 |
75% |
*London Interbank Offered Rate (0.73)
13 top trackers
|
LENDER |
TYPE OF DEAL |
RATE |
FEE |
MAX LTV |
|
2-year tracker |
3.64% (Base + 3.14) |
3.5% |
60% |
|
|
2-year tracker |
3.74% (Base + 3.24) |
3% |
60% |
|
|
2-year tracker |
3.75% (Base + 3.25) |
1.5% |
60% |
|
|
Term tracker |
3.88 (Base + 3.38) |
£1,695 |
75% |
|
|
2-year tracker |
3.99% (Base + 3.49) |
3.5% |
70% |
|
|
2-year tracker |
4.19% (Base + 3.69) |
3.5% |
75% |
|
|
2-year tracker |
4.59% (Base + 4.09) |
£995 |
75% |
|
|
2-year tracker |
4.50% (Base + 4.00) |
2% |
75% |
|
|
2-year tracker |
4.50% (Base + 4.00) |
£1,499 |
60% |
|
|
2-year tracker |
4.79% (Base + 4.29) |
£999 |
70% |
|
|
2-year tracker |
4.49% (Base + 3.99) |
£1,999 |
75% |
|
|
Term tracker |
4.99% (Base + 4.49) |
£1,495 |
75% |
|
|
Term LIBOR-linked tracker* |
4.99% (LIBOR + 4.26%) |
1.5% |
75% |
*London Interbank Offered Rate (0.73)
Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online
Get help from lovemoney.com
If you need help getting the best mortgage use our resources.
First, adopt this goal: Cut the cost of your mortgage and pay it off early
Next, watch this video: Getting through the mortgage maze
Then, why not have a wander over to Q&A and ask other lovemoney.com members for hints and tips about what worked best for them?
At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.
This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.