In a surprising turn of events, the number of buy-to-let (BTL) products available on the market has nearly tripled from the previous year. This trend is based on research from Moneyfacts, which highlights an increase from 988 BTL offerings available in October of last year to 2,581 options this year.

We’re not only seeing this trend annually; each month continues to bring an influx of new products. Just last month, we saw numbers climb from 2,475 to over 2,500.

The Rise of Two-Year and Five-Year Fixed Rates

Fixed rates are becoming a popular choice for investors, particularly those with a two-year term. Compared to this time last year, the number of two-year fixed-rate BTL products has swelled from 183 to a current total of 773.

Breaking it down further, two-year fixed rates at 60 per cent Loan to Value (LTV) have increased from 35 to 67. For those at 75 per cent LTV, we’ve seen deals blossom from 84 to 379. Lastly, a boom at 80 per cent LTV has resulted in the count growing from 28 to 97 in the past year.

Longer-term fixed rates are also on the rise. The numbers show an increase in total five-year fixed-rate products from 375 to 1,136 over the last year. This growth has been significant for deals at 75 per cent LTV — jumping from 197 up to a remarkable 613. The product count for 60 per cent LTV deals too has seen a leap from 36 to 81. At 80 per cent LTV, the number of five-year fixed rates rose from 52 to 85.

Fixed Rates Begin to Decline

While the quantity of fixed-rate products is rising, the rates themselves are showing a slight downward movement. Moneyfacts reports that the average two-year fixed rate has seen a slight dip from 6.64 per cent in September to 6.4 per cent in October. Similarly, the average five-year fixed rate decreased from 6.49 per cent to 6.32 per cent over the same month.

However, it’s worth noting that rates on the whole remain elevated compared to last year. The average two-year fixed rate last year was around 5.57 per cent, while this October the rate stands at 6.4 per cent. The average five-year fixed rate has seen a similar trend, rising from 6.05 per cent last year to 6.32 per cent this year.

The Remortgaging Landscape

While falling rates seem promising, landlords coming off a five or two-year fixed rate and looking to remortgage may find themselves facing higher rates than they initially signed up for. Moneyfacts indicates that rates are often at least three per cent higher than in previous years.

Decoding the Buy-to-Let Market

Rachel Springall, finance expert at Moneyfacts, sees the rise in product options and falling fixed rates as an encouraging sign for landlords looking to refinance, who might have otherwise been worried about escalating rates. However, landlords coming off their two-year or five-year fixed rate deals might find they need to dip into their pockets to afford the higher mortgage repayments.

The silver lining, as Springall points out, is that borrowers with just a 20 per cent deposit or equity should find average rates across two- and five-year fixed terms dropping below seven per cent this month. Those with a larger deposit or equity of 25 per cent will find the average rate at 75 per cent LTV stands at its lowest point since June 2023 at 5.85 per cent.

However, despite these promising trends, some landlords may be looking to sell. The profitability of a buy-to-let portfolio may not be covering costs, as profit margins have been hampered by reductions in mortgage rate tax relief, tax changes for capital gains tax and holiday lets, plus new EPC requirements.

Despite these challenges, interest in investing remains high as rental growth on newly-let properties hit a record 12 per cent across Great Britain, according to a study by Hamptons. They also predict a continuing decline in rental stock, which could underpin future rental growth.