Property investors continue to be attracted to the UK housing market by its strong returns and resilient performance, while the outlook for buy-to-let mortgages is also improving.

Rental yields have been improving in recent months thanks to consistently high tenant demand along with stable house prices, which are once again on the rise according to recent research.

In some parts of the UK, particularly in regions such as the north west and the north east, prices have remained strong throughout the recent slow-down across the rest of the market. Manchester, for example, has been named the UK’s “new property powerhouse” as it has outperformed the rest of the UK’s major cities over the past year.

One of the things investors and landlords have had to factor in more over the past couple of years, though, is buy-to-let mortgages. Along with the rest of the market, rates for buy-to-let mortgages have increased along with national interest rates, making borrowing more expensive for many.

While this has prompted a rise in the number of cash buyers for those who are able to invest without leverage, others have faced higher costs or have adopted a “wait and see” approach. However, as most analysts point out, interest rates are unlikely to drop as low as their pre-pandemic record levels, so adapting to the new landscape is key.

More choice for landlord borrowers

Since the start of the year, mortgage rates have been falling along with expectations of a cut to the Bank of England base rate this year, and falling swap rates. However, there was a slight uptick once more last month, in both mainstream and buy-to-let mortgages.

Now, though, according to the latest research from Moneyfactscompare.co.uk, rates have stabilised, or decreased once more for some products. What’s more, the level of product choice for buy-to-let mortgages has increased slightly month-on-month, which is welcome news after the start of 2024 saw a reduction of 276 deals for landlords.

Five-year deals on buy-to-let mortgages have increased more than two-year ones, with a rise of 47 products over the past month, while two-year deals have fallen by 19. That being said, there is still more choice for landlords than there was this time last year.

Low-deposit buy-to-let mortgages

Buy-to-let landlords with smaller deposits – 20% – can now have a bigger pick of products too, says Moneyfacts. As of 1st April, there were 136 options on two-year fixed rates with 80% loan to value (LTV), up from 133 in March, and from just 97 in October 2023.

Similarly, for those seeking a longer-term option, there were 141 deals on five-year fixed rates with 80% LTV at the start of this month, up from 135 last month and from 85 in October 2023.

Rates for lower-deposit buy-to-let mortgages are slightly lower now when looking at two-year fixed rates, with the average on an 80% LTV mortgage now sitting at 6.22% – down from 6.24% last month, and from 6.95% in October 2023.

Looking at five-year options, rates are up very slightly on 80% LTV mortgages, currently at 6.19%, compared with 6.18% in March. However, they remain down from October 2023, when the average was 6.84%.

Improvement should be “welcomed”

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said: “The stabilisation of buy-to-let product availability is a positive turn of events for landlords after recent months of contracting choice.

“Lenders will not doubt need to remain fluid with their product ranges and ensure they can react quickly to market uncertainty, such as volatility surrounding swap rates.

“Deeper analysis of product choice shows that lenders are now offering more two- and five-year fixed deals year-on-year, however, month-on-month the choice of two-year fixed deals fell slightly, but five-year options rose.”

Rachell also pointed out the growing pool of products for landlords with limited deposits or equity.

“This improvement in choice should be welcomed, but the real challenge surrounds affordability where both the average two- and five-year fixed rates at 80% loan-to-value remain above 6%. However, looking at the overall average rates, both have managed to remain below 6% throughout 2024 so far.”

If you’re ready to embark on your next UK property investment in one of the country’s property hotspots, get in touch with BuyAssociation today.