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Buy to Let

Buy-to-let mortgage rates have risen three months on the bounce

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
23/05/2022

Landlords still have a wide choice of products but borrowing is becoming more expensive as a result of rate rises

The average two-year fixed buy-to-let rate is at the highest level recorded since September 2015, at 3.41%, after rising for the last three months, said Moneyfacts.

The financial information provider said that this is 0.51% above where this rate stood at the start of December 2021 (2.90%), before any of the four recent base rate increases.

The average overall five-year fixed rate has also increased for a third month in row and sits at 3.56%. This is the highest since March 2019 (3.58%) and represents a rise of 0.38% compared to December 2021 (3.18%).

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “Rising interest rates and supply of property are not the only factors that may impact landlords in the months to come, as tax changes and the cost of living crisis may already be pinching the potential profitability of investing in property.

“Some landlords could feel that, coupled with other changes such as Stamp Duty surcharges and tax burdens, this is creating a “hostile” environment, which could see some consider leaving the sector altogether. Providers will need to work hard to attract new business in the months to come, so it will be interesting to see how the buy-to-let market adjusts to external factors.”

Product choice still high

Despite a tiny dip in buy-to-let product numbers of 61 last month, there were still 3,374 deals on offer at the start of May.

This is over 1,000 more available than a year ago.

Landlords with smaller deposits will find the level of choice at 85% loan-to-value (LTV) of 79 products is only one deal fewer than the 80 recorded last month – which was the highest number recorded since May 2008 (104).

Williams added: “Product availability in the buy-to-let sector remains strong, which will be positive news for landlords who saw volumes fall significantly during 2020. There are now 3,374 deals on offer, considerably above the number we recorded in March 2020 (2,897).”