This year has been a trying one for the buy-to-let (BTL) mortgage market, with not only several regulation changes to tackle but a base rate rise thrown in for good measure. It's the latter in particular that has had an impact on rates, with our latest research showing that the average two-year tracker BTL mortgage rate has risen by 0.20% since the 2 November announcement, the highest monthly rise on record.
It's an inevitability, but one that still won't be welcomed by borrowers, particularly those who have only ever known a time of continually falling mortgage rates. Yet as the table below shows, the average two-year tracker rate now stands at 2.43%, above last year's figure of 2.40% and notably higher that November's record low of 2.23%, having risen substantially since the base rate rise.
The average fixed rate BTL mortgage deal has also risen in the last month, albeit to not quite the same extent – the average now stands at 2.93%, a rise of just 0.04% from November and still comfortably below December 2016's figure of 3.01%. However, it's still an increase, and there's now only one way for rates to go – up.
"Just one month after the Bank of England's rate rise announcement, it's clear to see from the latest statistics that many providers have already factored in the increase, with the average two-year tracker BTL mortgage rate shooting upwards," said Charlotte Nelson, finance expert at moneyfacts.co.uk. "Rates have turned around from the record low of 2.23% in November with the largest monthly rise that has ever been seen on moneyfacts.co.uk records.
"Variable rates are designed to track base rate, so an increase to the two-year tracker rate is little surprise. However, not only has the average variable tracker rate increased, so too has the average two-year fixed rate, seeing rates bound upwards and nearing June 2017 levels with the highest monthly rise since April 2015."
Charlotte explained that the criteria changes for portfolio landlords, together with rising SWAP rates in the run-up to the base rate announcement and then the base rate rise itself, "has proved a lethal cocktail for fixed rate BTL mortgages, with all this pressure leaving providers little choice but to review their range".
The portfolio changes could already by starting to eat into the returns of landlords, and rising fixed and variable buy-to-let mortgage rates will only heighten the issue, "making many consider whether BTL is still the right option for them," said Charlotte. "With rates on the rise, it is important that BTL landlords weigh up their options carefully.
"Given that savings rates remain low, property is still seen as a good option by many and the lure of a higher return will continue to see many potential landlords wanting to dip their toe into the buy-to-let waters. However, as rates keep rising on BTL deals, borrowers will need to act fast if they still want to get a low rate, and anyone who is unsure should seek the advice of a financial adviser."
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