New pension freedoms have increased the number of buy-to-let mortgages reducing the cost with new cheap deals.

A report by Moneyfacts has revealed the cost of buy-to-let mortgage rates have fallen as the number of deals on offer increased from 476 two years ago to 745 today.

New pension freedoms have allowed people aged 55 and over to cash in their pension funds and many are using these funds for buy-to-let property rather than an annuity.

This increases competition and reduced supply of suitable properties with the prospective first time buyers continuing to rent and save for a bigger deposit.

There are also fewer regulatory restrictions as buy-to-let mortgages are considered to be business lending with tougher rules for residential mortgages such as first time buyers, home movers and remortgage buyers.

Buy-to-let price deals improving

The Moneyfacts report shows for a two-year fixed rate buy-to-let (BTL) mortgage deals priced under 3%, there were only five on the market two years ago and today that figure has increased to 83.

The majority of buy-to-let landlords take out an interest only mortgage rather than repayment to keep the monthly payments down.

For five-year fixed rate deals priced under 5% there were only 37 on the market two years ago and now the number has increased to 143.

Buy-to-let landlords can now choose from 226 fixed term rate deals which has increased from 162 six months ago, 71 a year ago and 42 two years ago.

Remortgage buyers at the end of your mortgage deal can benefit from lower rates by avoiding the lenders expensive variable rate and switch to a preferential rate to reduce your monthly repayment costs.

The average two-year fixed rate has seen significant decreases with rates at 3.45%, down from 4.44% two years ago. The average for a five-year fixed rate has reduced to 4.25% which was 4.67%two years ago.

There has also been a significant decrease in the rates with the average two-year fixed rate buy-to-let priced at 3.45% down from 4.44% two years ago. The average for a five-year fixed rate has reduced to 4.25% which was 4.67%two years ago.

One of the lowest rates is from BM Solutions with a 2.09% two-year fixed rate BTL mortgage for 60% loan to value although there is a high 2% arrangement fee.

Improving deals for equity release mortgage buyers means they can secure fixed rates typically from 5.8% upwards without any evidence of earnings, important for borrowers with only pension income.

Could the buy-to-let market boom?

The wide range of buy-to-let mortgages, fall in the cost of borrowing, new pension freedoms and coupled with the rise in rents across the country could result in a booming BTL market.

For pensioners thinking of cashing in their pension funds after taking their tax free lump sum, financial experts have warned of the potential high tax charge from HMRC for taking their fund as a cash lump sum.

Becoming a landlord also has implications such as capital gains tax, the risk of void periods and the need to secure insurance which can be more expensive for those over the age of 55, especially if they have medical conditions.

Older people may also have restrictions with their age as many mortgages have a maximum age of 70 to 75.

The good news is there are specialist buy-to-let mortgages lenders, such as The Mortgage Works, that landlords to make an application up to the age of 70 with a mortgage term of as long as 35 years.

What are your next steps?

Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.

Learn more by using the mortgage cost calculators, property value tracker chart and equity release mortgage calculator. Start with a free mortgage quote or call us and we can take your details.

For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to spend on anything such as buy a more expensive home or even help your children start or expand a business.

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