The buy-to-let market has undergone some significant changes over the past year, posing a number of challenges for landlords and requiring both landlords and lenders to rethink their options.
However, the latest research from moneyfacts.co.uk shows that the number of buy-to-let (BTL) mortgage products available has exceeded 2,000 – an all-time high.
There are now 2,022 deals, compared with 1,820 six months ago and 1,558 a year ago; the highest figure on the site’s records going back to November 2011. According to Charlotte Nelson, finance expert at moneyfacts.co.uk, there could be a number of reasons for this boom in buy-to-let products.
Two different types of BTL borrower
Since the Prudential Regulation Authority (PRA) changes at the end of September last year, lenders have had to apply stricter lending criteria to portfolio landlords – those with four or more properties. Now with two types of landlords to cater for (those with three properties or less, and portfolio landlords), providers may have opted to offer two different mortgage products for these different borrower types.
Portfolio landlords setting up as limited companies
Another boost could be a result of the increase in commercial buy-to-let mortgages. As a result of the changes in taxation, many landlords have been forced to re-evaluate the most tax efficient way to manage their properties. Certainly for portfolio landlords, establishing a limited company and converting to a commercial buy-to-let mortgage has been a popular action.
With all the changes seen in the past year, both existing and aspiring landlords have taken a step back to review and evaluate their options. As a result, mortgage providers have seen the pool of buy-to-let customers shrink, resulting in increased competition between lenders to secure new deals with a more varied product range.
It certainly seems that the increased competition for buy-to-let customers is driving lenders to adapt and expand their product ranges. Accord Buy To Let has reduced its rates on two- and five-year fixed rate mortgages by up to 0.18% and added £250 cashback on select mortgages.
Remortgaging landlords could benefit from 2.12% two-years fixed at 75% loan-to-value which has a free standard valuation or a five-year deal at 2.66% at 65% LTV, which comes with free standard valuation and free legal fees. Both include a £950 fee, plus £750 cashback on completion.
Ray Boulger, senior technical manager at John Charcol (independent mortgage brokers), said: “A few years ago, cashbacks were almost unheard of in the buy-to-let market. Now, as in the residential market, they are increasingly being used by lenders as a way of competing.”
LendInvest has also dropped its rates on select buy-to-let mortgages. The specialist lender has launched a 2.99% two-year fixed-rate for borrowers at 75% LTV. Rates have also been improved at 80% LTV to start from 3.69% for portfolio landlords, limited companies and individuals for a select time. Plus, the valuation fee has been reduced to £100 on buy-to-let remortgage cases up to £300,000, with free title insurance also offered.
Ian Boden, sales director at LendInvest said: “In the five months since launch, our buy-to-let product has gained impressive momentum, allowing us to step back and regularly evaluate our product offering.”
Whilst the past year has been somewhat of a rollercoaster for buy-to-let investors, the fact that the number of deals is still growing and importantly adapting to the new climate shows that it is still a viable option for many.