Buy-to-let fixed rates drop to lowest point since September 2022

It’s good news for buy-to-let landlords, as fixed rates have dropped to their lowest point since September 2022.

New data from Moneyfactscompare.co.uk found that average fixed interest rates on buy-to-let mortgages have fallen significantly from a record high six months ago.

A two-year fixed rate buy-to-let mortgage across all loans-to-value (LTVs) is now 5.49 per cent on average, down from 6.88 per cent in August 2023.

However, this is still significantly higher than the average 2.9 per cent rate in February 2022.

Meanwhile, a five-year fixed rate buy-to-let mortgage at all LTVs is now 5.48 per cent, according to the data, down from 6.72 per cent in August 2023 but higher than 3.16 per cent in February 2022.

The analysis also found that overall buy-to-let product availability – across both fixed and variable rates – has fallen month-on-month. However, compared to six months ago, there are around 250 more options.

Read more: Landbay slashes rates again

“Landlords concerned about interest rates may be pleased to find that both the average two- and five-year fixed buy-to-let rates have dropped to their lowest points since September 2022,” said Rachel Springall, finance expert at Moneyfactscompare.co.uk.

“These rates sat at a record-high just six months ago, so this is positive news for borrowers who have been patiently waiting for fixed rates to come down. However, it is possible fixed rates will edge up slightly in the coming weeks due to volatile swap rates, so those looking to refinance may wish to secure a deal quickly to not be left disappointed.”

Springall noted volatility in the market around product choice and encouraged prospective borrowers to seek advice to navigate the options available to them.

“Deeper analysis of product choice shows five-year fixed offers have waned month-on-month, but two-year fixed offers are resilient,” she added. “It will be interesting to see how lenders adjust their ranges in the weeks to come. There are more two and five-year fixed mortgages now than there were six months ago.”

A swathe of tax changes have been imposed on the buy-to-let sector in recent years, leading to an exodus of ‘dinner party’ landlords as returns became less lucrative. New eco requirements have added to landlords’ outgoings, making the sector mainly the preserve of portfolio landlords, defined as those with four or more rental properties.

“Those who are considering the opportunity to become a landlord will find rental growth on a newly let property across Great Britain rose 8.3 per cent year-on-year, according to a study by Hamptons, but this was the slowest pace for 13 months,” said Springall. “However, Hamptons signalled that rental growth is expected to run ahead of inflation for the remainder of 2024.

“Still, there will be existing landlords concerned about the ongoing profitability of a buy-to-let portfolio as their margins have been impacted by a cull in mortgage rate tax relief, tax changes for CGT and holiday lets, plus new EPC requirements. Any investor would be wise to seek advice before they commit, and providers will need to work hard to encourage borrowers to refinance and attract new business.”

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