2018 Will be the Year of the Buy-To-Let Spike
2 minute read
Two years on from the buy-to-let mortgage surge in April 2016, a spike in remortgages is now expected as many of those deals come to an end.
Many of the landlords securing buy-to-let mortgages in April 2016 did so with two-year fixes to guarantee the best possible rates. However, in a couple of months, those landlords will be switched to their mortgage provider’s standard variable rate, prompting many to search for a more competitive deal.
A change in buy-to-let regulation
The introduction of the stamp duty surcharge was designed to put a brake on the runaway buy-to-let market. The three percent stamp duty increase on second homes was delayed until 1 April to give those in the middle of existing purchases the time to complete. Inevitably, landlords planning to add to their portfolios in the year ahead rushed to push through deals and save themselves thousands of pounds in stamp duty.
This led to an increase in exchange activity of up to 35 percent in some areas, with the impact most noticeable in London. Many of those buyers were existing and prospective landlords, which means much of the interest in remortgages this April will be for buy-to-let deals.
Attractive buy-to-let remortgage rates
Landlords on two-year deals face the prospect of being moved onto their lender’s standard variable rate. But rather than paying more, many of those will choose to shop around to find the most attractive rates.
At the time of the buy-to-let mortgage boom in March 2016, the average price of a two-year fixed rate deal was around 3.16 percent, while a tracker was 2.89 percent. Despite the rise in interest rates since then, two-year fixes and tracker mortgages are still available at around the same rates.
But a two-year fix is certainly not the only buy-to-let deal available. Many landlords may also wish to consider a five-year fix, which although not quite as cheap, will provide protection against rate rises in the future and reduce the frequency that the fees associated with refinancing have to be paid. The stress test calculation on five-year rates is also more generous, which means you may be able to borrow more.