Is It Time to Rethink the Five-Year Fix in Buy-to-Let?

Buy-to-let mortgage brokers overwhelmingly endorse five-year fixed-rate deals, with 83% still favouring fixed rates and 42% specifically recommending five-year terms. This is according to a recently published survey.

However, some brokers now suggest two-year fixes or tracker mortgages to help landlords navigate shifting interest rates, but these remain less common.

Does a Fixed-Rate Mortgage Provide Landlords with Greater Stability?

Industry experts say that brokers often recommend a five-year fixed mortgage because it offers landlords more stability in the uncertain market.

Furthermore, they explain that with ever-changing regulations and the rise of unexpected economic challenges, it makes sense for landlords to choose something more predictable. However, they also note a gradually growing interest in shorter-term mortgage options in the Buy-to-Let market.

What Do Buy-to-Let Landlords Want?

As of the second quarter of 2022, approximately 83% of Buy-to-Let landlords were interested in long-term fixed-rate mortgages.

Now, around 55% of brokers say they now recommend tracker mortgages or short-term two-year fixed deals, according to the same survey mentioned above. This marks a big shift in thinking, from choosing stability to focusing more on affordability and potential profits.

The survey also showed that 38% of brokers now prefer two-year fixed deals, with trackers becoming more attractive. This shift is happening because the Bank of England has been slashing interest rates since last year. In fact, forecasts suggest that the base rate could reach as low as 3.5% by the end of this year. Currently, over seven million UK households have fixed-rate mortgages, while fewer than 600,000 are on tracker mortgages that adjust in line with the Bank of England's rate.

Conclusion

The Buy-to-Let mortgage market is shifting. While five-year fixed-rate deals still offer stability and remain popular, many brokers and landlords are now looking at shorter-term and tracker options due to falling interest rates.

As the economy evolves, landlords may need to strike a balance between the benefits of predictability and the potential savings and flexibility offered by shorter deals.