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Buy-to-let providers slash mortgage rates

Buy-to-let providers slash mortgage rates

Category: Buy To Let

Updated: 12/04/2016
First Published: 11/04/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The buy-to-let (BTL) market has been under extra pressure in the last few months thanks to the stamp duty hike, tax changes and recently-announced affordability tests, so a sudden rise in mortgage rates would not have been unexpected. However, our latest research can reveal that the opposite has actually occurred, with providers cutting rates dramatically in order to tempt landlords who were looking to complete sales before the stamp duty changes came into force.

Indeed, our figures show that buy-to-let mortgage rates continue to fall dramatically across the market – a trend that's been apparent for the last five years – with the fixed sector experiencing particularly beneficial reductions. The table below shows the changes in more detail, and as you can see, the reductions are marked:

Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Today
Average two-year fixed rate BTL 5.21% 4.90% 4.45% 4.03% 3.59% 3.32%
Average three-year fixed rate BTL 5.78% 5.16% 4.50% 4.62% 4.00% 3.87%
Average five-year fixed rate BTL 6.24% 5.53% 4.75% 4.76% 4.37% 4.00%
Compiled: 11.4.16

Charlotte Nelson, finance expert at Moneyfacts, commented on the findings:

"The BTL market has faced intense pressure recently, but despite this, rates have continued to fall across all fixed sectors. For example, the average two-year fixed rate has fallen by 0.71% in just two years, while the average five-year fixed rate has dropped by an equally significant 0.76% over the same period.

"While the new rules and stamp duty changes could potentially take the shine off BTL investment, property is often seen as a safe bet, and with rental properties in demand and rent high, BTL remains an attractive proposition."

And what about the pension freedoms? A year on and almost £3bn has been paid out in cash lump sum withdrawals, according to figures from the Association of British Insurers, so it's "highly likely that some of this money has been accessed with BTL in mind", added Charlotte. "Savings rates are currently so poor that many are looking elsewhere to fund their retirement, so lenders have tried to capitalise on this new pool of cash by offering some of the best rates the BTL sector has ever seen.

"In addition, providers also cut rates in the run-up to the stamp duty changes in order to attract those keen to buy before they were implemented, which has further aided the downward slide in rates. However, while the current pressures on the market are not yet causing rates to rise, borrowers should remember that they will now be facing tighter lending rules, including stricter affordability checks, so it is even more important for potential landlords to seek financial advice to see if BTL really is the right option for them."

What next?

Think buy-to-let is for you? Compare the best BTL mortgage rates to see if you can take advantage of things

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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