buy-to-let mortgage rates

Will buy-to-let mortgage rates continue to fall in 2023?

Mortgage rates across the board continue to come down as competition returns to the market, and the buy-to-let mortgage space is also benefiting from some welcome reductions.

When considering purchasing an investment property to let out, calculating affordability can be challenging when there seems to be so much changing in the market. Fortunately, though, buy-to-let mortgage rates have continued to get cheaper over recent weeks.

Back in October, with interest rates sky-rocketing and product numbers being greatly reduced, some prospective property buyers as well as those due to remortgage were understandably concerned by market conditions, so the recent shift will have been extremely welcome news.

Part of the problem was the fall in value of the pound that worsened due to the market turbulence caused by the mini budget. The situation has continually stabilised since then, although it seems unlikely that we will see a return to the ultra-low interest rate environment borrowers had become accustomed to.

How far have rates fallen so far?

At their peak in November 2022, the average fixed-rate buy-to-let mortgage rate hit 6.76%, according to data from Moneyfacts. Since then, though, the average rate has declined every month, dropping down to 5.91% as of the start of February 2023.

While lenders’ rates tend to bear some reflection of the Bank of England base rate, this demonstrates that they have actually moved in the opposite direction as the Bank has raised its rate on 10 consecutive occasions since last year.

Despite the fact that the Bank is expected to lift its rate again next month, it seems that wider interest rates, and specifically buy-to-let mortgage rates, are not necessarily going to be affected, as lenders’ confidence in the market has recovered over recent months.

So for those with an upcoming remortgage, or for property investors looking at taking out a new buy-to-let mortgage, the picture is certainly getting brighter, and there could even be a “price war” on the cards as lenders compete to attract borrowers by offering the best rates.

David Hollingworth of L&C Mortgages says of the outlook: “There are increasing signs that lenders are now starting to compete harder, and consequently fixed rates are beginning to fall. Top rates have dipped well below 5% and are edging closer to 4.5%.

“With swap rates down and a quieter market, we could soon find ourselves in the midst of a price war as lenders look to attract borrowers who are eager to pin down their biggest outgoing and defend against the higher cost of living.”

The best buy-to-let mortgage deals right now

For landlords and property investors scanning the market for buy-to-let mortgage offers, Moneyfacts has revealed its top picks at the moment from across the market.

The first option it singles out is from Accord Mortgages, which has dropped its buy-to-let fixed rate mortgage by up to 0.24% in the week commencing 13th February. Landlords can now obtain a two-year fixed rate of 5.34% at 75% loan to value (LTV).

It also comes with a “reasonable fee” of £995, says Eleanor Williams, finance expert at Moneyfacts, alongside a “generous incentive package, which includes both a free valuation and £500 cashback”.

For those looking to lock in for a longer period, Barclays is now offering a five-year fixed-rate buy-to-let mortgage at 4.9% on 75% LTV. It has cut its rate by 0.52% this week, making it the “lowest initial rate available within this sector of the market”, says Williams.

She concludes: “This product continues to carry a reasonable £1,295 fee which can either be paid upfront or added to the balance, and despite the lack of additional incentives, when considered as a whole package, this secures a place in our top tables and receives an Outstanding Moneyfacts product rating.”

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