Competition within the first-time landlord buy-to-let mortgage market has increased significantly over the last five years seeing a rise in the number of products available and a reduction in rates, research from Moneyfacts.co.uk reveals.
Over the last five years, the number of products available for first-time landlords has increased from 645 in 2014 to 1,405 today. As well as this, rates for both two-year and five-year fixed mortgages have also fallen, with the average two-year fixed rate decreasing from 4.01% in 2014 to 2.97% today and the average five-year fixed rate falling from 4.68% to 3.52% during the same period.
Buy-to-let market analysis – First-time landlord products
|Jul 2014||Jul 2017||Jul 2018||Jul 2019|
|Average two-year fixed rate||4.01%||2.85%||2.83%||2.97%|
|Average five-year fixed rate||4.68%||3.63%||3.94%||3.52%|
|Number of overall products||645||1,034||1,268||1,405|
Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Fixed rates for first-time landlords start below 1.50% on a two-year fixed deal, but the associated upfront product fees must be considered carefully. Borrowers must ensure they weigh-up the true cost of any deal before they commit; for example, choosing the lowest two-year rate in the market from Barclays Mortgage at 1.46% would cost £20,901 in repayments after the first two years, which includes its £1,795 product fee*. However, if they opted for a deal with a lower fee, such as the mortgage from Post Office Money® priced at 1.48% with a £1,495 product fee, they would have saved £255, as the repayment would be £20,646 over two years.
“First-time landlords concerned about potential rate rises may instead consider a five-year fixed deal, and thankfully rates have fallen in this sector since 2014. In fact, the average five-year fixed rate for first-time landlords has fallen by 1.16% since July 2014, down from 4.68% to 3.52% today.
“As the market is awash with economic uncertainties and regulatory adjustments, consumers would do well to first seek independent financial advice if they are considering a buy-to-let investment, not just to find the best product, but to also review these impacting influences.”
*Based on £200,000 repayment mortgage over a 25-year term.