One of the more noticeable changes we have seen at Landbay recently has been an increase in both interest in and take-up of two-year tracker mortgages, and our view is that this is likely to remain an important part of the buy-to-let market, particularly over next 12-18 months, potentially even longer.

That should perhaps come as little surprise given the interest rate environment landlord borrowers and their advisers are currently dealing with, because while borrowers have become accustomed to fixed rates providing certainty, there are times when flexibility can be just as important.

With uncertainty around the future direction of Bank Base Rate, swap rates and lender funding costs, some landlords may be questioning whether they want to lock into a fixed-rate based on today’s market conditions, particularly if they believe the current period of higher borrowing costs may prove relatively short-lived.

Flexibility has a value

This does not mean taking a tracker is simply a bet on rates falling, because there is a broader consideration around how much flexibility a landlord wants from their mortgage over the next couple of years.

An ERC-free tracker allows a landlord to secure the finance they need today, whether that is for a purchase or refinance, while retaining the ability to move onto a fixed-rate without an ERC should the rate environment change.

That can be particularly useful in a market where waiting for greater certainty has its own potential cost, because landlords may have purchases they want to complete, refinancing requirements they need to address or existing mortgage deals coming to an end.

Of course, there is a trade-off, and trackers will not be suitable for every borrower because monthly payments can increase if BBR rises, whereas a fixed-rate mortgage provides greater certainty over payments during the fixed period.

This is where advice remains important, because the conversation needs to cover the landlord’s ability to absorb potential payment increases alongside their plans for the property, expected holding period and appetite for flexibility.

 A much broader tracker choice

The other change we have seen is that trackers no longer need to be viewed as an option limited to a narrow group of buy-to-let borrowers, and our own range reflects the much wider circumstances in which landlords may want that flexibility.

Landbay offers two-year trackers across Core, Premier and specialist lending, including options for different landlord and property types, while there are also tracker choices available for Like-for-Like remortgages and Product Transfers.

Within Premier, our Like-for-Like and AVM Like-for-Like trackers also benefit from a reduced stress rate of 4.5% or pay rate, whichever is higher, which can make affordability another important part of the discussion for suitable refinancing cases.

 Keeping the options open

Nobody knows with certainty what BBR or mortgage pricing will look like six, 12 or 18 months from now, which is precisely why advisers need access to different options rather than assuming every landlord will want the same type of mortgage.

For many, a fixed-rate will continue to provide the payment certainty they want, but for others, the ability to respond to changing conditions without facing an ERC may carry increasing value.

From what we are seeing at Landbay, more landlords are considering that second option, and if uncertainty over the future path of rates continues, tracker mortgages are likely to remain an increasingly important part of adviser conversations in the months ahead.