Two-year fixes regain popularity for buy-to-let borrowers – Commercial Trust

Two-year fixes regain popularity for buy-to-let borrowers – Commercial Trust


The firm noted five-year fixes had seen a boom in popularity since the Prudential Regulation Authority’s (PRA) rules tightening lending criteria for shorter-term products were introduced in 2017.

It added that five-year deals were still the most popular mortgages applied for, but that the dominance was falling throughout the first half of 2019.

Chief executive Andrew Turner said: “At the end of 2018, 68 per cent of our buy-to-let (BTL) applications were for five-year fixed rate terms. The two-year fixed rate proportion was 26 per cent.

“However, by the end of Q2 2019, five-year fixes account for 59 per cent and two-year fixed deals are at 39 per cent.”


Brexit, base rate and regulation

Turner suggested there could be several reasons for this change, including Brexit, potential interest rate changes from the Bank of England and growing familiarity with the new lending regime.

“The Bank of England has, at different times, hinted at rates rises, should the economy grow in line with their forecasts, but then suggested that a no-deal Brexit could see the base rate cut,” he continued.

“Many landlords are looking to hedge their bets for the short-term, with a competitive, low rate BTL mortgage, which will hopefully last beyond all of the uncertainty, without locking them into a long-term agreement.

“At the same time, many experienced landlords have had two years to digest the implications of the PRA changes and have perhaps already made a move to a five-year deal.”

He added that it would be interesting to see if the trend continued “particularly given data that suggests the gap between two-year and five-year fixed rates has reduced.”


South West purchase rise

Data from Commercial Trust showed a shifting pattern of BTL purchase applications around the country, with a sudden upturn in the South West.

Other areas to see gains in overall applications so far in 2019, compared to the whole of 2018, were the East of England and the East Midlands. There has been a fall from London and the South East.