BTL Mortgage Choice Expands as Product Hits 25th Anniversary

Buy-to-Let (BTL) mortgages are an essential part of the UK's Private Rental Sector (PRS) and provision of rental homes across the country. As demand for PRS lets remains high, investors in the market are well-placed to take advantage of the widest range of BTL mortgage products in almost 15 years.

Meanwhile, the increased availability of mortgage products for the lettings sector comes as the BTL mortgage markets hits its quarter century, to mark 25 years since the first BTL mortgage product was created. In the 1990's, ARLA Propertymark approached two lenders, Paragon and NatWest, to discuss the creation of a brand-new mortgage type, specifically for residential rental investors. Then, in 1996 the first BTL mortgage as we would understand them today, was an option and the product remains an essential part of today's UK rental market - for landlords, tenants and lenders.

Largest Range of BTL Mortgage Products Since 2007

According to recent data from Moneyfacts, there were 2,968 BTL mortgage deals available across the UK at the beginning of September 2021. This is up from August and the highest number of available BTL mortgage products since records began in 2007 when there were 3,305 mortgages available for BTL investors.

But that’s not all. As well as three being a wider range than any time in recent years, average rates on two and five-year fixed-rate BTL mortgages in September were at multi-month lows:

• Average two-year fixed rate BTL mortgage rate 2.94% (2.89% Jan 2021)
• Average five-year fixed-rate BTL mortgage rate 2.35% (2.35% Dec 2020)

This highlights that after 25 years, the BTL mortgage market remains as important as ever for the UK housing market, rental market and broader economy.

“As we pass the 25th anniversary of the first buy-to-let mortgages as we know them, our data gives landlords cause for positivity,” said Eleanor Williams, a Moneyfacts.co.uk finance expert. “The resilience of this sector in the aftermath of a challenging 18-months is clear as choice now exceeds the number of deals available before the pandemic in March 2020 by 71 options.”

However, Moneyfacts data also highlights that at the riskier end of the market – where deposits are 15% or less for a loan-to-value (LTV) rate of 85% or higher, the choice of BTL mortgages is smaller. This indicates that while lenders are interested in expanding their BTL mortgage book, they prefer to do so at the safer end of the market.

Positive Development for BTL Market

With almost 3,000 mortgage deals specifically for BTL investors, and with such good average fixed-term deals available, this is a good time for BTL investors to either re-mortgage their existing investment properties or to expand their portfolios. 

It’s also a great time for first-time BTL landlords to consider entering the market. That’s because even though property prices are rising, savings rates remain pitiful. Meanwhile, tenant demand in the lettings sector is also strong and looks set to stay that way for some time. That’s a good mix of factors for BTL investors and can create a relatively reliable investment/savings option.