Increasing numbers of buy-to-let landlords are taking out two-year mortgages as they opt for shorter terms which offer greater flexibility amid the mortgage rate crisis.
When it’s time to remortgage as many as 79% of landlords are choosing fixed rates over trackers, according to Landbay’s latest landlord survey.
The number of landlords taking out five-year fixed rates is still higher with 40% of respondents opting for the longer term option. But it’s less than in December when 46% were going down the five-year route.
Meanwhile 32% of landlords are choosing to fix their rate for two years, an increase on December’s 24% and more than August 2022’s 13%.
Landbay, which provides buy-to-let mortgages through brokers, attributes this change to the spikes in mortgage rates over the last year – the most significant being in September 2022 as a consequence of the mini budget – and in recent weeks due to high inflation.
It is thought landlords may be fixing for shorter terms under the perception rates will fall again in the next couple of years as inflation settles back to its 2% target.
Paul Brett, managing director, intermediaries at Landbay, said: “No one knows where rates will go but many of our survey respondents are hoping to see a fall within two years.
“With more borrowers considering short-term fixed rates when remortgaging, Landbay has listened to the market and introduced a suite of two-year fixed rate like-for-like remortgage products. They come with the added advantage of a lower Interest Cover Ratio (ICR) stress test to help with affordability.
“As long as landlords are borrowing the same as their current mortgage, the remortgage stress test will be at pay rate plus 1% instead of the standard calculation of pay rate plus 2%.”
