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Buy-to-let mortgage deals up 30% on last year

Interest rates dropping amid competition between lenders

The number of buy-to-let mortgages available to landlords has hit a 10-year high this month, increasing by a third in the past year – and rates are dropping too.

The news is sure to be music to the ears of buy-to-let investors, who have faced sweeping tax changes in the last couple of years.

But with more lending restrictions set to come into force at the end of the month, is this level of competition between lenders likely to continue?

  • Finding the right buy-to-let mortgage can be a complicated process. To get impartial, expert advice on your options, call Which? Mortgage Advisers on 0808 252 7987.

Number of deals at a 10-year high

According to data from Moneyfacts, the number of deals available to landlords reached 1,735 earlier this month, the highest number since December 2007 and a 7% increase month-on-month.

Most significantly, this new high represents a massive 28.8% increase from the 1,339 deals recorded in the same month last year.

The surge has also had an effect on interest rates, with the average two-year fixed-rate deal reaching 2.86% this month – down from 2.91% in August.

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Are buy-to-let mortgages getting cheaper?

The initial rates available on buy-to-let mortgages remain at historic lows – but the headline rate doesn’t always tell the whole story.

The table below shows the best deals currently available to buy-to-let landlords with a 40% deposit, based on their initial rate.

Term Lender Initial rate APRC Max loan-to-value Portfolio size
Two-year fixed-rate Post Office 1.41% 4.2% 60% Max three properties
Three-year fixed-rate Virgin Money 1.69% 4.4% 60% Max 11 properties (4 with Virgin)
Five-year fixed-rate Barclays 2.17% 4.7% 60% Max 6 properties

*Mortgage data from Moneyfacts, correct as of 22 September

Beyond this, there are significant variables. The deal from the Post Office seems particularly attractive as it is open to first-time landlords – but there’s a fee of £1,495 to set it up, and you can’t apply if you’ve got more than three properties.

The Virgin deal, meanwhile, comes with an arrangement fee of £1,995, while Barclays asks for £1,950.

With this in mind, it’s best to thoroughly research the best deals available to you and get advice from a specialist broker before taking out a buy-to-let mortgage.

Lending restrictions to be tightened

The uplift in the number of available buy-to-let deals comes ahead of the Bank of England tightening lending regulations for landlords with four or more properties.

From 30 September, portfolio landlords applying for a mortgage will need to provide full financial information for each of their properties, rather than simply disclosing their top-line profits.

These new regulations mark the latest hurdle for landlords, who in recent years have seen their profits slashed by stamp duty changes and mortgage interest tax relief reforms.

What effect will new rules have on mortgage deals?

It remains to be seen how each individual lender will react to the changes, though last week Barclays confirmed it will only make ‘minimal changes’ to its criteria by asking portfolio landlords to fill out a ‘property schedule’ containing the extra information.

In terms of the wider buy-to-let mortgage market, there could be an adaptation period as lender bring in more specialist underwriting processes.

On the other hand, the number of available deals could go up in the short term, if lenders choose to clearly adapt their products to target two different types of landlord – those with four or more properties, who will be affected by the new regulations, and those with three or less.

Your home may be repossessed if you do not keep up repayments on your mortgage.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.

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