What's happening to buy-to-let mortgage rates?

Buy-to-let (BTL) mortgage rates have fallen since the start of 2024, but they remain considerably higher than a couple of years ago. 

This means landlords due to remortgage will face much higher repayments, and investors might think twice before expanding their portfolios.

Here, Which? explains what's happening to BTL rates and reveals the cheapest deals currently on the market.

What's happening to buy-to-let mortgages?

Buy-to-let mortgage rates recently fell to the lowest levels since September 2022, when the cost of mortgages soared after the government's mini-Budget.

After dropping to 5.5% this February, rates have risen very slightly over the last few months, reaching 5.55% in June.   

This is much higher than the 3.4% recorded two years ago, meaning landlords remortgaging at the end of a two-year deal will see their repayments go up. 

The graph below shows what's happened to fixed-rate BTL mortgage rates over the past year.

Find out more:

Will buy-to-let rates get cheaper?

The base rate has stabilised recently, giving lenders the confidence to reduce their rates over the first half of 2024. 

There are hopes that the base rate will fall later this year as the Bank of England closes in on its target of bringing inflation down to 2%.

A fall would likely result in lenders reducing their prices further.

In the meantime, however, any significant drops seem unlikely. The next base rate announcement takes place on 20 June.

Find out more: 

Best rates on buy-to-let mortgages

There are currently around 2,500 BTL mortgages on the market. Most are available to landlords with deposits of at least 25%, though some higher loan-to-value deals are available. 

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.

As you can see, these rates are significantly more attractive, but there are drawbacks. The cheapest deals here come with substantial up-front fees, which you'll need to factor in when comparing overall costs. 

For example, the lowest-rate 60% mortgage has a fee of 3% of the amount you borrow, so if you borrow £200,000, you'll need to pay a fee of £6,000. 

Fee-free BTL mortgages are uncommon, but some deals do come with lower up-front fees of around £999-£1,500.

Two-year fixes

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Five-year fixes

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Are landlords selling up or staying in the game?

Landlords have sold more properties than they've bought every year since 2016, according to data from the estate agent Hamptons.

Landlords using company structures can offset 100% of their mortgage interest against their profits and pay corporation tax rather than income tax. However, mortgage rates for limited companies can be significantly more expensive.

Things landlords need to know this year

The last few years have been a tumultuous time for the rented sector, and the remainder of 2024 could bring further uncertainty. 

The Renters Reform Bill failed to pass through parliament before it was dissolved ahead of the general election. This means that what happens next with buy-to-let reforms, including , will be decided by the next government. Landlords are also facing uncertainty over future energy reforms, after plans to make all rented properties achieve Energy Performance Certificate ratings of C were scrapped last year.

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