There has been a notable recovery in the number of mortgage products on offer to landlords with smaller deposits or levels of equity, indicating a greater level of confidence in the buy-to-let sector.

After dropping back to only four deals on offer in November 2021, there are now 28 products available at 85% loan-to-value (LTV), the highest this number has been since March 2020 (32) and a vast improvement on last year, when January 2021 saw no options available in this bracket, according to Moneyfacts.

The figures provided by the site show that there was an increase from December to January of 222 products on offer to landlords, bringing the current total to 3,528. It said it was the most since September 2007 and was 945 more than in January 2020, before the Covid-19 pandemic.

The average overall two-year fixed BTL rate has increased for the second consecutive month, rising by 0.04% to 2.94% – the highest this has been since September 2021 (2.94%).

The average overall five-year fixed rate on the other hand has remained static at 3.18% since October 2021, despite fluctuations across the various five-year fixed averages at specific loan-to-values (LTV), and is the lowest Moneyfacts has recorded since August 2020.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “The level of product choice available to landlords has continued to increase for the eighth consecutive month, with the number of options across all the LTV tiers improving. The rise of 222 deals is the highest month-on-month increase in availability that we have recorded since July 2021.

“At 3,528 total deals on offer, this is the largest number of BTL products we have seen in more than 14 years. Despite changes to regulations, taxation and the impact of the past 18-months, BTL lenders seem keen to entice borrowers, as there are almost 1,000 more products available now than there were two years ago in January 2020, before the onset of the pandemic.

“Following the increase in base rate by the Bank of England last month, we have seen the average two-year fixed rate for all LTVs rise by 0.04% since last month to 2.94%, a shift which echoed recent changes in the residential mortgage sector. Bar a 0.01% month-on-month fall in the average two-year fixed rate at 80%, average rates in the other LTV tiers either rose or remained the same this month, including a month-on-month jump of 0.25% at 85% LTV, fuelling the overall two-year average to rise.

“The overall average five-year fixed rate on the other hand has remained stable for four months now, unchanged at 3.18% since October 2021. Landlords looking to secure a five-year fixed rate in the brackets between 65% and 80% LTV will find that the average five-year fixed rates in these tiers fell month-on-month, which is great news for those hoping to protect themselves from potential future rate rises with the stability of a mid-term fixed rate deal. Those who took out a 75% LTV five-year fixed rate in 2017 and are looking for an equivalent deal now will find that, at 3.19%, the average rate is 0.70% lower now than when they secured their previous deal.

“Landlords who have a smaller level of deposit or equity, however, may find that, as with the two-year fixed rate, the average five-year fixed rate in the top 85% LTV tier has risen. Increasing by a significant 0.30% this month, at 5.52% this is now 0.23% above where the equivalent rate sat in January 2017. It is fair to note that this remains quite a niche lending area with comparatively few products on offer, and is viewed as higher risk by many providers.   Therefore, it takes very little movement, or just a slight adjustment from any of the handful of lenders who operate in this arena, to make a notable impact to the average rates.

“The latest Rental Market Report from Zoopla indicates that rental demand grew to a 13-year high in the third quarter of 2021, and while demand for property continues to outstrip supply, it also recorded an increase in average UK rents of 4.6% over the year, so there may be those considering investing in the sector. Our latest data suggests that providers seem prepared to offer a variety of deals for landlords who are either investing in property or are looking to lock into a new deal, so anyone considering their next move in the BTL arena would be wise to seek advice from an independent broker to assess the changing market.”