Landlords are seeing the costs of finance decline after the Bank of England cut interest rates at the beginning of the coronavirus outbreak, in a bid to support the economy.
Lenders have begun to pass on the drop in interest rates to borrowers in the form of lower rates on mortgages.
These include cuts in the rates available to landlords, on both shorter and longer-term deals.
Financial group Moneyfacts reports that the average rates on both two-year and five-year mortgage deals have declined year on year.
It said that the average two-year fixed rate mortgage for landlords has dropped from 3.02 per cent at the beginning of May last year to 2.51 per cent 12 months later.
It means the average monthly payment has dropped from £377 to £314 during the same period. It equates to a potential saving of £63 a month, or £756 a year.
This is based on an interest-only mortgage of £150,000 taken across a 25-year term.
Some landlords prefer to take a five-year fixed rate deal, as it means they can avoid some of the strict lending criteria applied to shorter-term mortgages.
Moneyfacts said that the average five-year fixed rate buy-to-let mortgage has seen rates drop from 3.53 per cent to 2.94 per cent 12 months later.
It’s seen average monthly payments drop from £442 to £368 during this time. It equates to a potential saving of £74 a month, or £888 a year.
While average mortgage rates have dropped for landlords, the number of deals they can access has also declined.
The total number sat at 2,235 in May 2019, compared to only 1,455 at the beginning of May 2020.
Some lenders withdrew their products altogether at the beginning of the coronavirus outbreak, with the likes of the Mortgage Works and HSBC withdrawing their tracker mortgages.
At the start of the outbreak there were fears that some lenders would increase the cost of borrowing, due to an increased risk of tenants defaulting on rents and falling property prices.
However, this has largely failed to materialise amid measures taken by the government, such as a ban on evictions, which the government achieved by banning starting court proceedings.
It extended the notice period on Section 21 notices from two months to three months, meaning no tenant can be forcibly evicted during this period.
Looking for the latest news and features to help you stay ahead? Sign up for our monthly newsletter and get the inside track on the issues that matter to you.Sign up now
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
6th Floor99 Gresham StreetLondonEC2V 7NG
Sol House29 St Katherine's StreetNorthamptonNN1 2QZ
© Copyright 2022 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.