The proportion of landlords opting for two-year fixed rates jumped from 8 per cent to 26 per cent in the final quarter of 2019, compared to the same period a year earlier, according to research by Mortgages for Business.

The buy-to-let broker found that five-year fixed rates remained the most popular product for landlords, although they were significantly less common than a year ago.

The proportion of landlords fixing for five years dropped from 84 per cent in Q4 2018 to 68 per cent in the final quarter of the year.

Mortgage for Business attributes the ongoing dominance of five-year fixes to the fact that lenders apply less rigorous stress tests on longer-term deals, which means landlords can typically borrow more than they would on shorter-term options. 

The broker says that the increase in popularity of shorter term fixes may be the result of landlords wanting to maintain flexibility due to the Brexit uncertainty which dogged the market at the end of last year.

The number of buy-to-let mortgage products increased slightly from 1,971 in the final quarter of 2018 to 1,981 in Q4 2019.

For limited companies, the number of products rose from 718 to 738.

Mortgage costs for landlords dropped year on year, with the average five-year fixed falling from 3.58  per cent to 3.44 per cent.

Three-year fixes fell from 3.33 per cent to 2.78 per cent and two-year deals dipped from 3.08 per cent to 3.07 per cent over the same timeframe.

Mortgages for Business managing director Steve Olejnik says: “Recent political uncertainty has led more landlords to opt for two-year fixed rates over longer-term fixed rate products.

“Landlords are drawn to the shorter early repayment charge periods associated with these types of products, which provide greater flexibility. “Given we now have more certainty in the political system, we forecast that landlords may start to look at longer term fixes again in the future.”  

Olejnik adds: “More landlords are expanding their portfolios through a limited company which has proven to be a more effective borrowing vehicle both from a tax perspective and financially. 

“Lenders have responded to that and demand has fuelled an increase in the number of products available.”