Buy to let choice for first time landlords hits record high

The choice of first time landlord buy to let products has risen to a record high, up over the last five years from 645 deals to 1.405 today, the latest research shows.

The latest report from Moneyfacts says that even with substantial changes in terms of regulation of the lending market and tax, lenders are still wanting to attract new landlord business.

‘Entering the buy to let market hasn’t been without its hurdles, and almost two years since the PRA introduced rules expected to tighten lending, the move doesn’t seem to have shaken up lenders attitudes to attract first-time landlords. In fact, the number of deals available to these individuals has now boomed to a record high,’ said Rachel Springall, finance expert at Moneyfacts.

But she pointed out that while the rise in choice is good news to prospective landlords, the financial strain of recent tax changes may be starting to show on those who are currently invested in property, according to recent data from the Office of National Statistics (ONS).

The ONS data highlighted that London private rental prices rose by 0.9% in the 12 months to May 2019, which is the highest annual growth seen since September 2017. She believes that this rise may well be linked to the staggered loss of mortgage interest tax relief, which in turn has seen landlords seeking out other ways to boost their income.

Springall explained that fixed rates for first time landlords start below 1.5% 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.

She also pointed out that first time landlords concerned about potential rate rises may instead consider a five year fixed deal, and 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,’ Springall added.