Buy to let mortgage market recovering

The buy to let mortgage market is showing signs of recovery after the number of deals nearly halved during the early weeks of the coronavirus pandemic.

A total of 1,660 different mortgages are currently available to investment landlords, up from a low of just 1,455 deals at the beginning of May, according to financial information.

The choice of mortgages in the sector dived sharply in March and April, dropping from 2,897 products at the beginning of March, as lenders pulled deals while they re-evaluated the market.

In further good news, the average cost of two-year and five-year fixed rate mortgages have also fallen compared with March, to stand at 2.72% and 3.11% respectively, although they have edged up slightly since July.

Despite the lenders pulling deals from the market, mortgage choice has been on a broadly upward trend since May, while the fall in average rates suggests the market remains competitive and lenders are keen to do business.

Even so, a number of mortgages have been withdrawn in August, suggesting lenders continue to re-evaluate their ranges.

The government has raised the Stamp duty threshold from £125,000 to £500,000 on all property purchases until 31 March 2021, although those buying an investment property or a second home will still have to pay stamp duty.

This rise in activity is good news for those who want to rent a home, as there is currently a significant mismatch between supply and demand, which has been forcing rents higher.

Although average mortgage rates for buy-to-let investors have fallen since March, the drop has not been seen across the board.

Landlords looking to borrow 60% of their property’s value face the most significant price hikes, with the average cost of a two-year fixed rate mortgage rising by 0.53% during the period, while five-year fixed rate deals have risen by 0.45%.

The trend is surprising as, although rates for people taking out 60% loan-to-value mortgages remain lower than those for people with smaller deposits, lenders are usually keen to attract borrowers in this segment of the market.

Buyers guide and mortgage advise.