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Lenders have continued to cut rates towards the end of 2023 and the start of the new year, bringing hope for borrowers that affordability is set to improve.

Falling swap rates and an improved economic outlook have led to lenders reducing their rates since autumn last year, and landlords and property investors are increasingly being able to secure buy-to-let mortgage rates at less than 4%. This is an improvement from when rates hit peaks of almost 7% last summer.

Some of the UK’s major banks and building societies have brought fresh, cheaper deals to the table since the start of 2024, including Co-operative Bank, First Direct, HSBC, NatWest, Halifax, Clydesdale Bank and Leeds Building Society, with a number of these lenders also offering buy-to-let mortgage deals.

While the wide expectation is that the Bank of England will hold interest rates at 5.25% for the next few months at least, most experts forecast that this will be lowered over the course of the coming year, based on positive inflation news. This could see lenders become even more competitive, bringing confidence to the housing market.

Landlords “expanding portfolios”

One specialist lender that has recently slashed its rates to less than 4% is LendInvest. Its new range starts from 3.79%, an 80bps cut from its previous offering. LendInvest offers buy-to-let mortgages for complex properties such as large houses in multiple occupation (HMOs) and multi-unit freehold blocks (MUFBs) of up to £1.5m.

It also offers products for portfolio landlords and limited company landlords, potentially owing to the recent increase in the number of landlords operating via a limited company structure.

Sophie Mitchell-Charman, commercial director at LendInvest, says: Our brokers are telling us just how ambitious landlords are, and they want to spend 2024 expanding their portfolios. This new range is designed to help them make up for lost time, with cheaper products, powered by our market-leading technology and delivered by our experts.”

CHL Mortgages is another specialist buy-to-let mortgage provider that has cut its rates, this time by up to 65bps, bringing its lowest-rate product down to starting from 3.06%. This deal is available on a two-year fixed standard buy-to-let product up to 65% LTV, with a 7% fee.

The lender caters for standard buy-to-let owners, from individuals to limited companies, as well as those with more complex investments such as HMOs and MUFBs. There are also buy-to-let mortgage options available with higher LTVs, up to 75% LTV.

Ross Turrell, commercial director at CHL Mortgages, said: “With five-year swap rates improving on the back of better global inflation forecasts we are pleased to bring in some welcome rate reductions for the hard-pressed buy-to-let sector. This along with a steady increase in rents will see the affordability calculations start to go back into equilibrium.”

Could buy-to-let mortgage rates fall further?

What will happen over the coming weeks and months depends on a variety of factors, including the wider economic picture, swap rates and confidence in the market. However, many experts foresee mortgages – including buy-to-let mortgage rates – to continue to improve for borrowers.

Borrowers are being urged to take the whole package being offered by lenders into account, though, rather than just go for the cheapest headline rate. Some products will have higher fees attached than others, while there are also deals available with higher rates but added incentives, such as free legal fees.

Rachel Springall, finance expert at Moneyfactscompare, said: “As we are just in the first week of the New Year, there has not been a mass movement across multiple lenders to cut rates, but it is a typically subdued period for activity.

“There are big expectations for mortgage rates to fall in the coming weeks and any vigorous repricing can provide better deals for borrowers desperate to refinance.

“Seeking advice to go over the true cost package of any deal is vital so that consumers are not swayed by just the headline grabbing rates.”

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