Landlords are shifting towards shorter-term fixed rate mortgage deals, where pricing remains ultra-low and predictions for increases in Bank Rate are pushed into the distance, according to the latest research from specialist mortgage broker Mortgages for Business.
The broker’s Property Investment Survey found that as of the final quarter of 2014, the proportion of property investors favouring two year fixed rates had nearly doubled since the start of the year. This now stands at 23% from just 12% in Q1 2014.
By contrast there was a decline in the proportion of landlords who would choose longer term fixed rates. In a marked reversal, fewer would now fix their mortgage repayments for three years than would prefer a two-year deal. Just 15% prefer three year fixed rate products (down from 21%).
The proportion of property investors who would fix for five years has fallen less dramatically, from over one third (34%) in Q1 2014 to 31%. Moreover, in the latest figures only 8% would opt for a 10-year fixed rate if available (down from one in 10).
David Whittaker, managing director at Mortgages for Business, said: “Tempted by cheap rates, landlords are deciding to take their chances with a shorter term deal.
“It’s true that these ultra-competitive mortgage rates will probably continue for some time – as the financial world increasingly predicts virtually zero inflation in the UK and Eurozone, plus a cooling rate of economic growth. That doesn’t mean there’s no room for caution. Even in such an exceptional situation, rates are still expected to rise in due time. However, landlords now seem willing to take the chance that won’t happen for at least a couple of years.
“However, we maintain our recommendation to fix for longer, particularly where the pricing difference between three and five year fixed rates is narrow.”