Buy-to-let landlords could get better returns now than at start of 2020


As many investment options remain volatile right now, property investment could be a particularly attractive avenue. For those looking to borrow to invest, portfolio buy-to-let landlords could get the best deals.

Interest rates remain at historic lows, with the Bank of England holding its base rate at just 0.1% for now. This means minimal returns through traditional savings vehicles for most investors. On the flip side, low mortgage interest rates are continuing to entice borrowers and property investors.

As a result, many are rethinking their buy-to-let investment options. A recent raft of regulatory and tax changes may have put off some landlords from the market. However, the stamp duty holiday coupled with cheap borrowing and high tenant demand mean it could be a lucrative time to invest in the right property.

How buy-to-let mortgage rates compare

Many lenders have pulled a large selection of their products over the last six months, to minimise risk levels. Higher loan to value (LTV) have unsurprisingly come off worst. However, the picture is quite different when comparing options for first-time landlords and established buy-to-let investors.

While mortgage interest rates are relatively low for all buy-to-let products, they have increased for first-timers. Between September 2019 and September 2020, two-year deals at 75% LTV have risen from 2.9% to 3.01% (MoneyFacts). For those with a 40% deposit, the average rate for a two-year fixed product has gone up from 1.98% to 2.41%.

In terms of the number of products available, there has been a big drop since September 2019. Much of this fall occurred since March this year as a result of the pandemic. For example, first-time landlords have access to 159 two-year fixed-rate deals at 75% now, compared to 247 in March. Those with a bigger deposit can access 77 two-year fixed deals with 60% LTV, down from 90 in March.

Unfortunately, product numbers have also fallen for established buy-to-let landlords, in most areas. However, an existing landlord with a 40% deposit actually has access to more five-year fixed rate deals now than they did in March (138 vs 133).

And rates have actually fallen for those borrowers who already own investment properties. The average two-year fixed rate at 75% LTV is now 2.17%, down from 2.34% last September. Likewise, those looking at longer term deals can get a five-year fixed rate at 75% LTV for 2.4%, compared to 2.65% last year.

Is it worth investing now?

According to a report from MoneyFacts, existing landlords can also benefit from the current buoyancy in UK house prices. This may mean they have increased equity in their property or properties now. But will higher house prices put some off reinvesting right now?

“With house prices at a high and the challenges currently facing some areas of the BTL sector, landlords may be tempted to reduce their property portfolios by selling off some of their properties,” says MoneyFacts.

“Landlords considering this should keep in mind that rents in areas outside of London have continued to rise during 2020, which together with lower mortgage rates, could mean that they are able to get a better return on their investments now than at the beginning of the year.”

“And, if rents continue to rise and BTL mortgage rates stay low, in the long-term BTL could remain a lucrative investment for landlords.”

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Buy-to-let landlords could get better returns now than at start of 2020


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