The rate for an average five year fixed buy to let mortgage has fallen to 3.43%, a figure not seen since last October, data reveals.
The Moneyfacts website says this drop in rates is down to lenders wanting to attract potential borrowers who are considering remortgaging after they signed up to a two-year fixed-rate before the April 2016 stamp duty surcharge was brought in.
The website’s finance expert, Charlotte Nelson, says: “To beat the stamp duty increase, many borrowers rushed to buy in the first few months of 2016 and March saw a big increase in the purchasing of buy to let property.
“A big chunk of those borrowers are likely in the coming months to be remortgaging.”
She says that in anticipation of this, buy to let lenders have increasingly boosted competition in their five-year fixed rate to attract customers which has led to the Moneyfacts joint lowest rate being recorded.
Five-year fixed rates will be popular among landlords
While these five-year fixed rates will be popular among landlords, they may be even more popular as the stress tests imposed by lenders for two-year fixed rates are not applied to five-year deals.
Indeed, Moneyfacts says this might be why buy to let lenders are focusing on the five-year fixed-rate market.
Ms Nelson added: “This price war shows no sign of abating at the lowest end of the mortgage market with the sub-2% five-year fixed rate being breached for the first time by the Mortgage Works.”
However, she warned that despite the good news the mortgage lending market has changed significantly over the last two years with extra regulations for borrowers including stricter lending requirements.
The cost of BTL mortgages is beginning to rise
However, the findings from Mortgage Brain reveal that the cost of BTL mortgages is rising.
Their data reveals that UK landlords are facing extra pressure for costings of mainstream buy to let mortgages.
They say that a two-year buy to let tracker is now 3% higher than for November last year. That's for a loan with a 60% and 70% LTV.
For loans with an 80% LTV, the rate is now 2% higher than it was three months ago at 3.44%.
They say landlords have better news when looking for a longer term BTL deal with a 2% reduction in costs for a five-year fixed-rate mortgage with a 70% LTV.
The chief executive of Mortgage Brain, Mark Lofthouse, says: “The cost of mainstream BTL mortgages is being affected by the Prudential Regulation Authority’s changes and the start of interest rate rises.”