Since Liz Truss was Prime Minister, mortgage rates have risen across the board: for residential, remortgages and Buy to Let from a low of around 1.99% just recently to the current figure of around 5%.
The Bank of England, last week, held the base rate at 5.25% and there has been recent good news for the BTL market, where some portfolio landlords have seen low fixed term mortgage deals end to be replaced by much higher costs. This has seen rising rents across the UK where demand often outstrips supply.
Landbay have recently changed its mortgage stress test criteria – you can read more on that here.
But in this, our May 2024 monthly blog post, we want to look at the wider issue of BTL finance.
Currently, and historically, BTL rates have always been higher than residential mortgage ones. At their lowest two years ago, a typical BTL mortgage was charged at 3.4%. This rose to 6.7% in August 2023. They then dropped to 5.5% in February 2024 and now stand at a similar rate – 5.6%.
It is hoped too that, as inflation falls, the Bank of England base rate may reduce and mortgage interest rates may dip too for landlords. The next review is on 20th June 2024 and many industry experts expect the base rate to remain unchanged. This means that further dips may be unlikely in 2024 – but with a General Election this year, who really knows?
The graph below shows the average rates in the past year.
According to This is Money and UK Finance:
There are roughly 2 million buy-to-let properties that have a mortgage attached, according to the trade association for the banking and financial services sector, UK Finance.
The best deals for landlords can be found where a 40% deposit is paid.
Howard Levy, director of buy-to-let lending at mortgage broker SPF Private Clients states:
‘The increase in rates impacts landlords and investors who are looking to take out a mortgage now so I would recommend getting ahead of this by booking mortgage rates as early as possible, so that you have an option ready to proceed. If rates drop in the meantime, then a new application can be applied for, but if rates increase then at least the booked option is in reserve.”
Often quoted advice, across the board, is for landlords to fix for 5 years, to give some financial certainty. But many are opting for a 2 year fix in the expectation that BTL rates will drop between now and May 2026.
None of us have a crystal ball, though, and it’s always wise to take financial advice from expert mortgage brokers before deciding.
We do know, at Hogan’s Leeds, that properties for investment purposes and to let, are selling quickly. Rental prices have also risen because demand is high and landlords are paying more in mortgage costs.
Hogan’s Fast Sale also offers a quick purchasing option for those struggling to sell their property.
You can see the process here.
