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Landlords: BTL mortgage rates are still falling!

Landlords: BTL mortgage rates are still falling!

Category: Buy To Let

Updated: 22/09/2016
First Published: 21/09/2016

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 It is now over 6 months old so the content may be out of date.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 cut to base rate has had a welcome impact on mortgage rates, and it isn't only residential borrowers who are benefiting. Indeed, our latest research shows that buy-to-let (BTL) investors are continuing to enjoy a fall in mortgage rates, particularly those looking for a longer-term deal, with average rates falling to all-time lows.

These rates are falling rapidly, too: the figures show that the average five-year fixed rate BTL mortgage at 75% loan-to-value (LTV) has fallen by a significant 0.49% in six months to stand at 3.96%, which marks the first time that the rate has fallen below 4.00%. Meanwhile, the average five-year rate at 70% LTV has fallen by 0.15% in a single month, while the average at 60% LTV has fallen by 0.13%.

The table below highlights the recent changes in more detail. As you can see, all rates have dropped dramatically, with all falling by almost 1% year-on-year:

BTL Average Rates Five-Year Fixed Rates A Year Ago
Six Months Ago One Month Ago Today
60% Loan-to-value 4.39% 3.73% 3.61% 3.48%
70% Loan-to-value 4.84% 4.38% 4.11% 3.96%
75% Loan-to-value 4.83% 4.45% 4.07% 3.96%
Source: Compiled 21/09/2016

"The reduction in the Bank of England Base Rate to 0.25% has already affected BTL rates, with all LTVs for five-year deals having reached the lowest on record this month," said Charlotte Nelson, finance expert at Moneyfacts.

"With savings rates at record lows, many savers that once used their interest to supplement their income are looking elsewhere, and as bricks and mortar is often deemed a 'safe bet', many are looking to BTL as an investment option."

However, although it may look appealing, it's important not to jump in too quickly. As Charlotte points out, "while the costs of obtaining a BTL mortgage are being driven down, there are other costs to factor in". This includes the stamp duty surcharge that was introduced in April, as well as the tax relief changes that are coming into play next year. And that's before we even get to things like landlords insurance, maintenance costs and lost income through void periods – it can all add up.

But, if you look at BTL as a long-term investment and are prepared to weather the financial storms that can accompany it, it could be a viable option – and now's certainly the right time to consider it! Such low BTL mortgage rates mean this kind of investment is becoming increasingly attractive, but just make sure you're aware of the risks, and that you seek financial advice to check that it's the right option for you.

What next?

Ready to take the plunge? Compare the top BTL mortgage rates

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.