More landlords choosing two-year buy-to-let deals

Data from Commercial Trust Limited has revealed a growing number of two-year fixed rate buy-to-let applications in the first half of 2019.

The buy-to-let broker has seen two-year applications increase from 26% at the end of 2018 to 39% by the end of Q2.

Commercial Trust believes that more are looking for a short-term solution to “ride out the economic and political chaos created by Brexit”.

Andrew Turner, chief executive said, “Five-year fixed rate buy-to-let deals have proved dominant over several quarters, notably since the introduction of the PRA rules, which tightened lending criteria for shorter-term products in 2017.

“Five-year applications remain predominate, but there has been a definite shift to two-year applications during the first half of 2019.

“There could be a number of factors at play here, with the obvious explanation being that the first half of 2019 has seen political and economic uncertainty, largely as a result of Brexit negotiations.

“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.

“Many landlords are perhaps looking to hedge their bets for the short-term, with a competitive, low rate buy to let 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.

“Of course locking in for two years gives a landlord the opportunity to reassess the market much sooner and to consider re-mortgaging in two years’ time, without necessarily incurring additional early repayment charges.

“It will be interesting to see whether this trend towards shorter term deals continues, particularly given data that suggests the gap between two-year and five-year fixed rates has reduced.”