Buy-to-let mortgage rates have fallen from their 2023 highs, but they are still well above the levels that many landlords had fixed at when the base rate was lower, and borrowing was cheap.
That leaves landlords facing a tricky decision when a deal ends: lock in now with a longer fix, take a shorter one and hope rates are lower next time, or risk a tracker that moves with the base rate.
Moneyfacts data shows the average two-year fixed buy-to-let rate is 4.7%, while the average five-year fix is 5.09%. Those figures are a useful guide for landlords remortgaging this year, particularly those coming off five-year fixes taken out at much lower rates.
There are, though, far cheaper headline deals available. The lowest five-year fixed rate is currently 2.49%, and the lowest two-year fix is 2.2%, but the cheapest deals tend to come with the biggest fees.
What the averages mean for monthly costs
Many buy-to-let investors use interest-only mortgages to keep monthly costs down. But when the rate jumps, the monthly payments jump up with it.
On an interest-only mortgage of £200,000, a five-year fix at 5.09% works out at around £848 a month in interest alone, before any fees.
Landlords then have the usual costs on top – repairs, maintenance, insurance, letting agent fees, safety checks and the occasional void period. That is why refinance decisions can have a big effect on cash flow, even if the property is well-let and running smoothly.
The fee problem: cheapest rate doesn’t always mean cheapest deal
The buy-to-let market is full of deals with a rate that looks great on paper but come with a sting in the tail.
Some of the lowest headline rates have big product fees. In some cases, fees can be as high as 10% of the mortgage amount. On a £200,000 loan, that would be £20,000, which cancels out any of the benefit of a lower rate.
It is why landlords need to look carefully at the full cost of a mortgage – the rate, arrangement fee, valuation costs and any cashback – not just the headline figure.
It also explains why the cheapest deals usually sit at lower loan-to-values, with the best prices tending to be aimed at landlords with a larger deposit or more equity, while deals at higher LTVs can be considerably more expensive.
Fix for five years: the “sleep at night” option
A five-year fix is popular for a reason. It provides landlords with a guaranteed monthly payment and takes a lot of uncertainty out of running a property.
It can also help with affordability. Buy-to-let lending is usually assessed using what is known as the interest coverage ratio (ICR), which measures whether the rent comfortably covers the mortgage interest. Lenders typically want a buffer, not just a break-even figure, and they also stress test the mortgage to check that it would still work if rates were higher.
A longer fix can sometimes make that test easier to pass, particularly for landlords borrowing at a higher loan-to-value, or where rent levels are already stretched.
The downside is obvious. If rates come down substantially over the next couple of years, a landlord who fixes for five years could be stuck paying more than they need to, unless they are willing to pay early repayment charges.
Fix for two years: cheaper now, but you’re back in the market sooner
Two-year fixes can be attractive because they often come in slightly lower than five-year deals, which helps landlords protect cash flow, at least in the short term.
They are also the choice for landlords who believe mortgage rates will continue to edge down and want the chance to refinance again sooner.
But there is a trade-off. A two-year fix means the landlord is back at the remortgage table in 2028, and nobody can guarantee what rates will look like then. It can work well if rates fall. It is not so good, though, if rates stay higher than expected.
In practice, some landlords choose a two-year fix simply because it is the best available option for their situation, rather than because they are trying to make a call on where the market is going.
Tracker mortgages: flexible, but not for everyone
Trackers follow the base rate, plus a set margin.
The benefit of them is that, if the base rate comes down, the mortgage rate comes down too. Trackers also usually come with no early repayment charges, so landlords can quickly switch to a better fixed deal if pricing improves.
That kind of flexibility has value in a changing market.
But trackers work both ways. If the base rate stays where it is, or rises again, monthly payments rise too. That is why trackers suit landlords whose properties run at a reasonable surplus each month, so they have a buffer if things go in the wrong direction.
So, should landlords stick or twist?
For most landlords, this comes down to three questions:
Can the property support the mortgage payment at today’s rates?
How important is certainty over the next few years?
How much risk are you comfortable taking if rates move the wrong way?
Five-year fixes buy stability. Two-year fixes keep options open. Trackers give flexibility but demand a bigger appetite for risk.
There isn’t a single “best” choice across the board, but there is usually a best fit for each landlord, based on the property, the figures, and how they want to run their portfolio in 2026.
