Record lows for buy-to-let fixed rates

Fierce competition in the buy-to-let sector has driven fixed-rate mortgages to their lowest-ever levels.

Data from Moneyfacts.co.uk, provided to Mortgage Strategy, shows average buy-to-let fixed rates have fallen significantly over the past two years as lenders turn their attention to landlords. The average rate for a two-year fix has fallen from 4.84 per cent in August 2012 to 3.78 per cent this month. They have dropped 25 basis points from 4.03 per cent in the past year.

Five-year fixes have fallen from 5.31 per cent to 4.51 per cent over the past two years. A year ago the average five-year fix stood at 4.8 per cent. Tracker products have also fallen, with average two-year trackers falling from 4.41 per cent in August 2012 to 3.5 per cent this month. In the last 12 months, two-year trackers have declined by 62 basis points from 4.12. Five-year trackers have fallen from 5.15 per cent to 4.85 since August 2012, though in the last 12 months rates have actually increased slightly from 4.73 per cent.

A spokeswoman for Moneyfacts.co.uk says buy-to-let fixed rates are currently at the lowest ever levels.

The Buy to Let Business managing director Ying Tan says: “There has certainly been steady decline in mortgage rates over the last couple of years.

“Buy-to-let has always offered good margins and arrears levels are good. I’ve been in buy-to-let both as an investor and professionally for 18 years and have never seen rates as low as they are now. Demand is high, rental yields are good so this space is doing very well at the moment. There are more lenders in the market today than there were two years ago and that is a good indicator of how buy-to-let is shaping up.”

Fox Davidson director Wesley Davidson says: “Over the last few years we have seen many more lenders promoting their services to claim their share of the market, including some of the commercial lenders.”

The buy-to-let market is forecast to exceed £25bn in gross lending in 2014, up from £20.7bn in 2013 and £15.7bn in 2012.