Many buy-to-let (BTL) investors choose mortgages as a way to invest in property. Of course, if you want to pay cash that’s an option if you can afford it. However, if you want to leverage your money effectively and buy more properties with the same amount of money, mortgages are the way to do it.
Since 2020, the Bank of England’s base rate has been at a record low of 0.1% in order to support the post-pandemic recovery. This means that mortgage rates are incredibly favourable for those wanting to lend.
The economy is recovering quickly, and although it shrank 1.5% during the first three quarters of 2020 due to coronavirus, the Bank of England (BoE) upgraded its forecast for economic growth and policy makers now expect the economy to surpass its pre-pandemic size as early as the final three months of the year. Lenders therefore do not seem to be too worried about the future state of the economy so are all competing for a market share – another reason rates are great currently.
The successful vaccine roll-out in this country as well as the relaxing of social distancing rules, has meant the BOE expects the economy to expand 4.5% between April and June, accelerating further over the course of the year.
The extension of the Stamp Duty Holiday has also been a big factor for increased activity in the market. Before Rishi’s announcement activity had started to slow down with 87,000 mortgages approved in February 2021, down from a peak of 103,700 in November 2020. That being said, February’s figures are still almost 20,000 applications above the six month average of 67,300.
When Coronavirus hit, understandably there was panic (from everyone including lenders) and the criteria for lending had become extremely strict. Now, the spike in average mortgage rates at higher LTVs appears to be reaching a plateau, in large part due to improvements in the economic outlook.
Additionally Moneyfacts data shows that products targeting landlords are climbing rapidly as lenders seek to gain market share. Investors can now choose from 2,333 products, suggesting the sector has recovered to 81% of pre-pandemic levels, compared to 68% recovery in the wider residential sector. This is great news for landlords looking to invest.
If you would like to speak to any of our Investment Directors about the current investment opportunities with mortgages, please call us on +44 (0) 113 380 8930 or email info@ereproperty.com
