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Buy-to-let mortgage rates are now at a 17-month low

Despite some uncertainty creeping back in around mortgage rates, there’s good news for property investors as the average buy-to-let mortgage rate has dipped once again. 

Landlords and investors who have been waiting for an opportune time to take out new borrowing or remortgage may find that now is the time to act, as the data shows buy-to-let mortgage rates are at their lowest since September 2022 – but could begin to rise slightly in the coming days and weeks.

Over the past week, a number of lenders have begun raising their costs again slightly in response to the news that the UK had slipped into a technical recession in the final quarter of 2023. This resulted in an uptick in swap rates, which lenders use to set their mortgage prices, resulting in some products being moved to higher rates.

While this is certainly something to watch, the hope and general expectation is that this should be reversed if the economic outlook improves, with the Bank of England widely anticipated to begin bringing down its base rate later this year.

However, in the buy-to-let mortgage space, the latest report from Moneyfactscompare reveals that buy-to-let mortgage rates hit a low this month that has not been seen since around 15 months ago, after gradually coming down along with the wider market.

Cheaper but fewer products on the market

Six months ago, buy-to-let mortgage rates hit a record high based on Moneyfacts records, which began in November 2011, meaning rates have fallen considerably since then. The average rate a landlord can currently secure is between 4.87% (five-year fixed at 60% loan to value) and 6.30% (two-year fixed at 80% LTV).

Two-year fixed rates remain only very marginally higher on average than their five-year counterparts – 5.49% versus 5.48% – which is a shorter gap than has been seen in recent months. With rates falling for a number of months now, two-year products have been particularly popular due to the expectation of further rate falls in the near future.

However, as Rachel Springall, finance expert at pointed out, there is a possibility that fixed rates could “edge up slightly in the coming weeks due to volatile swap rates”. She therefore encourages landlords to secure a deal “quickly to not be left disappointed”.

While rates have come down, the number of buy-to-let mortgage products on the market has also shrunk due to an increase in volatility and some lenders pulling certain products in recent weeks. Moneyfacts found there were 2,838 products available this month in total, down from 3,114 in January.

However, this is still higher than the 2,585 on the market in August last year, while in February last year there were 2,246 buy-to-let deals on offer.

A good time to secure a buy-to-let mortgage?

It is important to note that rates can always go up or down, based on either predictable or unforeseen circumstances and the wider economic picture, so looking at ongoing trends cannot predict what will happen next when it comes to mortgages.

However, following the current trajectory, while keeping the broader market in mind, is important for landlords and property investors when deciding when the right time is to hone in on an investment.

Rachel Springall notes that landlords who have been particularly concerned by high interest rates “may be pleased” about the latest rate fall in the buy-to-let mortgage space. In terms of product number fluctuations, she adds: “The ebb and flow of deals makes it essential for prospective borrowers to seek advice to navigate the options available to them.”

The fact that the UK’s rental market is also extremely strong at the moment adds something of a buffer when it comes to mortgage rates. Springall points out that rental price growth on newly let property increased 8.3% year-on-year in the UK, according to Hamptons, which also signalled that “rental growth is expected to run ahead of inflation for the remainder of 2024”.

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