Landlords looking to expand their portfolio or remortgage are therefore feeling the squeeze.
Here, Which? explains what's happening to buy-to-let (BTL) rates now and reveal the best deals on the market.
What's happening to buy-to-let mortgages?
Rates for BTL properties rose sharply following the government's mini-budget in September last year. They had gradually been coming down in recent months, but they're now back on the rise.
Higher-than-expected inflation figures have fuelled predictions the Bank of England will have to raise interest rates even further to combat rising prices.
As a result, a host of lenders pulled buy-to-let mortgage deals at the end of May and re-introduced products with higher interest rates.
The average fixed-rate deal at the start of June was 5.81% according to data analysts Moneyfacts. In May, that figure stood at 5.56%.
The graph below shows what's happened to BTL mortgage rates over the past year.
Find out more:Will buy-to-let rates get cheaper?
As with homeowner loans, it is hard to predict what the market will look like in the coming months. But as rates are heavily influenced by the base rate, it's likely they will continue to climb.
Landlords will therefore feel a big pinch when they come to remortgage. Those with expiring fixed-rate deals secured when rates were much lower, could be in for a financial shock when refinancing to a new deal.
Find out more:Best rates on buy-to-let mortgages
Landlords currently have 2,315 mortgage deals to choose from, with a number of smaller deposit deals - up to 80% loan-to-value (LTV) - now on the market.
Looking at average rates gives us a general idea of what's happening in the market, but when you're taking out a mortgage you'll want to get the cheapest deal you can.
While deals can look cheap compared to a few months ago, the best deals all come with substantial upfront fees, which can cost thousands of pounds. So it's important to look at the overall cost of the mortgage rather than focusing solely on the initial rate when comparing deals.
Two-year fixes
Five-year fixes
undefinedAre landlords selling up or staying in the game?
Landlords sold 35,000 more properties than they bought in 2022, with the rental sector losing an average of 66 properties a day last year, according to analysis by agents Hamptons.
Hamptons also says 140,000 people stopped being landlords in 2022, and 96,000 are expected to follow suit each year over the next five years as portfolio holders reach retirement age.
But despite high mortgage rates, the demand for rental properties remains high, so landlords may choose to remain in the market.
Research by mortgage firm Landbay reveals that seven out of 10 buy-to-let landlords do not intend to sell any of their properties in 2023.
Find out more:Mortgage rates aren't the only hot topic...
As well as high mortgage rates, BTL landlords are facing some tricky legislation changes.
Landlords will also be forced to ensure their properties are energy compliant and achieve an Energy Performance Certificate (EPC) rating of at least C by 2028, under government plans. Swathes of privately rented homes have an EPC rating below C, which means landlords will need to carry out costly upgrades over the coming years.
Find out more:Advice on becoming a landlord
source https://www.which.co.uk/news/article/whats-happening-to-buy-to-let-mortgage-rates-aPCwx0Y6FH3h