While lower rates are good news for landlords, those due to remortgage will face higher repayments, and investors might still 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 are at the lowest levels since September 2022, when the cost of mortgages soared after the government's mini-Budget.
The average fixed BTL rate is now 5.25%. This is lower than the 5.96% recorded two years ago, but well above the 3.15% recorded five years ago.
This means landlords remortgaging at the end of a two or five-year deal will see their repayments go up.
The graph below shows what's happened to fixed BTL mortgage rates over the past year.
Find out more:Will buy-to-let rates get cheaper?
The mortgage market picking up could bring greater competition between lenders, resulting in better choice and cheaper deals for borrowers.
However, any significant drops seem likely in the short term. On announcing the base rate cut, the Bank of England's Monetary Policy Committee urged caution about the dangers of 'cutting rates too much or too quickly'.
Find out more:Best rates on buy-to-let mortgages
There are currently around 2,700 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
undefinedFive-year fixes
undefinedAre 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.
What might happen with rental sector reforms?
The last few years have been a tumultuous time for the rented sector, and the future remains unclear on some key issues.
The Renters Reform Bill failed to pass through parliament before it was dissolved ahead of the general election. The new Labour government has Section 21 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. The new government says it will introduce similar rules, but exactly how they'll look and when they'll come into force remains to be seen.Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665 and is an Introducer Appointed Representative (FRN 610689) of the following:
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Other financial services:
Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ. London & Country are authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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