BTL Rates To Ease by Year End? by Heather Hilder on October 9, 2024 BTL Rates Will BTL Rates ease by year end? With residential mortgage rates falling to sub-4% over recent weeks, autumn has seen a flurry of activity as buyers have returned to the market. Confident of further Base Rate cuts, lenders have continued to cut rates to tempt buyers to put their hands in their pockets and buy. But what does this mean for landlords? Buy-to-let mortgage rates are traditionally higher than residential. In September, average buy-to-let mortgage rates fell to their lowest levels since September 2022, although they remained above 5%. They had previously peaked at 6.79% in August 2023 but had fallen to 5.45% in September. The rate compares to an average 4.38% two years ago and 3.16% five years ago. Between August 2023 and February 2024, figures show that the average rate fell steeply for buy-to-let rates. The pattern since then has been less extreme. However, the base rate cut of 0.25 percentage points to 5% by the Bank of England in August has helped to prompt mortgage rates to drop further. An additional base rate cut of 0.25 percentage points to 4.75% is widely expected in November which should prompt further decreases. How far will base rates fall? Although some lenders have been offering sub-4% deals in the buy-to-let market they have tended to come with high loans to value and high fees for both 2- and 5-year fixed deals. The Mortgage Works, for example, reduced rates by up to 0.35% across selected buy-to-let products for new customers in September with rates starting from 3.49%. The deals included a five-year fixed rate at 3.69% with a 3% fee and 65% loan to value and two- and five-year fixed rates of 3.99% for the same LTV with a £3,995 fee. However, at the end of September, HSBC announced a five-year fix rate for landlords looking to re-mortgage of 3.99% with a £1,999 product fee and a 65% loan to value and other lenders are likely to follow suit. The impact on landlords The predictions are that buy-to-let rates should ease again by the year end, especially if there is a third base rate cut in December as some are predicting. However, landlords will still face pressure. Changes to mortgage interest tax relief has seen some landlords selling up in the last year or two. A new survey by Goodlord suggests that 30% of landlords have sold or put a rental property on the market in the past year and a further 17.4% are considering downsizing portfolios in 2025. Meanwhile, more are using limited companies for their portfolio, enabling them to offset their mortgage interest against their profits and pay corporation tax rather than income tax. The Renters’ Rights Bill is also forcing landlords to reconsider their overall costs according to the survey, as well as new obligations around energy efficiency standards which could prove expensive. For these reasons, any cuts in buy-to-let mortgage rates will be welcomed by landlords. Callaways Estate Agents supports landlords along the South Coast, including Falmer, Worthing, and Brighton & Hove. Contact us today to learn how we can help you adapt to new regulations and safeguard your investment. Reach out now for expert advice!
