Buy-to-let landlords are increasingly opting for tracker and variable rates, research from Legal & General has found.

30% of buy-to-let mortgages made through Legal & General’s Mortgage Club were variable rates, up from 13% in Q2 according to Legal & General’s seventh quarterly report in the ‘Mortgage Purchase Index’.

The findings show 17% of residential borrowers chose a variable rate compared to 12% in Q2.

The average two-year fixed rate decreased to 4.99% from 5.46%, but average three and five-year fixed rates are all up significantly.

The average residential LTV was 59%, whereas for buy-to-let it was 66%.

Stephen Smith, director of housing at Legal and General, said: "There has been a distinct shift towards tracker and variable rates by landlords but the move is less pronounced amongst residential borrowers. The proportion of buy-to-let mortgages on variable rates arranged through our Mortgage Club has doubled in three months, 13% to 30%."

However, our data shows that landlords have traditionally preferred variable rates of one sort or another and that the big leap we have seen is from a low starting point. In Q1 last year, for example, over 60% of buy-to-let mortgages were on variable rates.

“Average two-year rates have dropped from 5.46% to 4.99%, but three and five-year rates are up 0.92% and 1.03% respectively. This indicates how strong the belief in the money markets is that interest rates will rise over the coming few years. Those borrowers that have recently been taking out tracker rates will need to factor this in.

“To a certain extent, the low-interest rate environment may be creating an illusion that the economy is ‘back to normal’ and that the recession is nearly over. In fact, the Bank Base Rate at this current level is far from normal and things will not go on like this forever.”