Fixed rate two-year buy-to-let mortgages have seen a further growth in popularity in the first quarter of 2023, increasing by 8% from December 2022, according to the latest landlord survey by Landbay.

The survey by the mortgage platform found that when the time comes for remortgaging, 79% of landlords expect to opt for a fixed rate.

Three in 10 landlords (32%) have said that they will opt in for a two-year fixed rate when the time comes to remortgage, which is up from just 13% in August 2022.

Forty per cent of landlords said they will take the five-year fixed rate, which is down from 46% in December 2022, and down even further compared to August 2022, when 68% said they would go for this option.

Landbay stated that this change in sentiment towards two and five-year fixed rates is partially down to the fallout from Liz Truss’s mini-Budget in September 2022, where interest rates rose sharply. Other factors include the volatile economy and the cost of living crisis, which fuelled by high inflation, has led to rising interest rates.

The move towards two-year fixed rates by landlords is due to the perception that mortgage rates will reduce in the next couple of years as inflation falls back towards the Government’s 2% target.

Longer-term fixed rate (7–10-year terms) were favoured by 7% of the survey respondents, with tracker mortgages only selected by 4%.

Managing director, intermediaries at Landbay, Paul Brett, said: “It’s interesting to see that there has been a rise in the number of remortgaging landlords considering two-year fixed rates and a drop in those opting for five-year fixes. No one knows where rates will go but many of our survey respondents are hoping to see a fall within two years.

“With more borrowers considering short-term fixed rates when remortgaging, Landbay has listened to the market and introduced a suite of two-year fixed rate like-for-like remortgage products. They come with the added advantage of a lower Interest Cover Ratio (ICR) stress test to help with affordability. As long as landlords are borrowing the same as their current mortgage, the remortgage stress test will be at pay rate plus 1% instead of the standard calculation of pay rate plus 2%.”

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