buy-to-let mortgages fixed rate mortgages

Buy-to-let mortgage rates are defying the market trend

After another disappointing announcement from the Bank of England, it seems the buy-to-let mortgage market is going against the grain by dropping rates.

Residential borrowers looking to fix onto a good mortgage deal at the moment might be downhearted to find that rates have crept up once more over the past month, off the back of news that the Monetary Policy Committee (MPC) had once again opted to hold the base rate at 5.25%.

However, a growing number of lenders have been announcing cuts to their buy-to-let mortgage rates, as well as refreshed products to incentivise landlords to take out loans. This will be welcome news for any investors either remortgaging or looking at new property, as rates are moving in a better direction.

According to the latest data from Uswitch, the current average two-year fixed rate on 75% loan to value (LTV) across the big six lenders is 5.14%. This is an increase of 0.06% compared with last month, and remains unchanged from last week.

But buy-to-let borrowing is now only marginally more expensive, at an average of 5.45% across the big six lenders for a two-year fix with 75% LTV.

Lowest buy-to-let mortgage rates

When looking at the average two-year fix across all lenders (not just the big six), this has fallen by -0.05% in buy-to-let mortgages since last month, to 5.64% on average. The lowest rate across all lenders has fallen, reaching just 3.74% after a -0.09% drop since May.

What’s more, the lowest average rate in the buy-to-let space is now lower, according to Uswitch’s data, than the lowest average rate in the residential (homeowner) sector, showing how competitive lenders have become in getting landlords onto their books.

However, more reductions across the board could be on the cards, with Uswitch mortgage expert Kellie Steed noting that we could see “further reductions in fixed rate deals throughout July”.

She adds: “If you’re coming to the end of a fixed-rate deal it’s still wise to consider your options as soon as possible. Mortgage deals have been increasingly short-lived recently, and rate volatility is difficult to predict.”

Responding to inflation

The lenders that have been reducing their buy-to-let mortgage rates over the past couple of weeks are likely to be responding to the positive inflation news that was recently announced by the Office for National Statistics (ONS). It also looks increasingly likely that the Bank of England will finally cut its base rate in the summer.

One lender to have brought its buy-to-let rates down this week was Molo Finance, whose rates for UK landlords now start from 4.55% for a two-year term. This equates to a 17bps reduction from the lender, while five-year fixed rates start at 5.06% – a 15bps reduction.

They have also refreshed their range on HMOs, MUFBs, new-builds and investor-led properties, with buy-to-let mortgage options now starting from 4.65% for a two-year fixed rate and from 5.16% for a five-year fixed rate.

Molo’s distribution director, Martin Sims, commented: “After last week’s encouraging inflation news, we are now able to realign our UK resident buy-to-let fixed rates.

“This, we believe, will further assist our intermediary partners when structuring their landlord clients’ investment property finance and also secure enhanced future returns.”

Cut for limited company landlords

Fleet Mortgages has also announced rate cuts on buy-to-let mortgages, with a 20bps reduction to its standard five-year fixed rate product, bringing it from 5.34% to 5.14%. This is for individual borrowers, while limited company borrowers can enjoy a 35bps cut from 5.49% to 5.14% on the same product.

Steve Cox, chief commercial officer, said: “The price cuts are significant and will represent a positive monthly cost saving over the term of the mortgage.

“I’ve often spoken about how business activity improves the closer we get to 5% pricing in the buy-to-let sector, and clearly we are not a million miles away from such levels now.

“We anticipate a great deal of borrower interest in these repriced and new products, and we’re here to support advisers with their landlord clients as they seek to ensure they can meet affordability, secure the loans they need, and continue to stay invested in the private rental sector.”

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