Although the buy-to-let landscape may have changed over recent years, landlords continue to overcome obstacles – and the property market outlook just got brighter for the year ahead.
Property investment remains one of the most popular long-term asset classes, favoured for its reliability and lack of volatility compared to many other forms of investment. The recent resilience of the housing market in the face of economic pressures has seen a boost in buyer confidence over the past year, and the forecast is for this to improve in 2025.
Buy-to-let mortgage rates have also now dropped to their lowest level since September 2022, while product availability is also significantly higher, giving property investors a much better range of options at more competitive rates than over the past couple of years.
Research from Moneyfactscompare.co.uk has revealed that there are now a huge 3,277 buy-to-let mortgage products available on both fixed and variable rates, up from just 988 in October 2022. This is also a small uptick from the 3,186 deals available last month.
When it comes to rates, the average two-year fixed rate on any loan to value (LTV) is now 5.24% (down from 6.40% a year ago), and this drops to the lowest average of 4.45% for a five-year fixed rate with a 40% deposit. If you’re fixing for two years with an LTV of 60%, the average rate is now 4.67% – down from 6.09% a year ago.
Positive signs
Economists are widely expecting the Bank of England to bring down the base rate at its next announcement on 7th November, and this could see buy-to-let mortgage rates further slashed by lenders. Those looking to either enter the market, enhance their portfolios, or remortgage in the coming months will certainly find cheaper deals than before.
Rachel Springall, finance expert at Moneyfactscompare, said: “The buy-to-let market has had its fair share of challenges over the years, so landlords might find it encouraging to see fixed interest rates have been on the downward trend. There are also many more deals for borrowers to choose from, as lenders have been adjusting their ranges to accommodate demand.
“These are positive signs for prospective landlords, but there are numerous other factors to consider before taking the leap into the buy-to-let sector, not just the cost of a mortgage. The margin of profit from rental income may well be tighter than expected, but property is still regarded as a safe long-term investment.”
Property investors are adapting
While property investors are now beginning to secure cheaper mortgage rates, in some cases boosting what they can afford to buy, they are also benefitting from rising rental yields as demand remains extremely high in the sector.
And despite the challenges that have been faced by property landlords in recent years linked to both rising mortgage rates and the result of tax changes impacting the buy-to-let market, huge numbers of landlords have changed tack in order to continue to make their property investments a successful long-term prospect.
The number of buy-to-let properties operated by limited companies set up by landlords between January and September this year has increased by 23% compared with this time last year, according to Hamptons. Meanwhile, almost three quarters (70%) of new buy-to-let investments in England and Wales are now being made through a limited company.
This changes the way that tax is paid on an investment property, with owners also being able to claim different tax reliefs than they could if they owned it as an individual. There are also other potential benefits, such as being able to minimise inheritance tax by allowing heirs to become shareholders of the limited company.
If inheritance tax thresholds are changed in today’s Budget (or other changes are made that could up the bill for some people), there could be an even greater surge in landlords using a limited company to hold their housing investments.
Rachel Springall concludes in her latest report: “Landlords will be on tenterhooks to see how the upcoming Budget will play out and lenders may remain fluid with their fixed rate pricing over the next few weeks, particularly due to volatility surrounding swap rates.
“Any borrowers concerned about their present situation would be wise to seek independent advice if they need support or indeed to navigate the latest deals if they are due to refinance in the next few months.”
If you’re looking for your next UK property investment opportunity in one of the country’s top-performing locations, get in touch with BuyAssociation today.