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Buy-to-let mortgage rates are holding steady as the Bank of England hints at potential cuts, but mortgages still cost more than a couple of years ago.
Remortgaging a rented-out home is at the cheapest for a year but is still eye-wateringly expensive for landlords.
Many investors will watch April 2025’s tax changes, which will scrap short-term holiday let mortgage relief and eat into their property business profits.
Buy-to-let mortgages have only just shrugged off the impact of short-lived Chancellor Kwarsi Kwartang’s disastrous mini-Budget from September 2022 that saw interest rates soar.
High inflation kept mortgage rates high, with buy-to-let loans peaking at 6.79 per cent in August 2023.
Rates plateaued in February and have hovered around 5.55 per cent over the intervening months.
The current rate is almost double the average 3.4 per cent last on the market two years ago.
Lenders' two-year fixed-rate deals are coming to a close, meaning landlords must remortgage at a significant cost or sell.
However, there are better mortgage deals than the cheapest interest rate.
The Best Buy table below shows that the Zephyr Homeloans’ 65 per cent loan-to-value two-year fix has the cheapest rate at 3.74 per cent. Crunching the numbers to give the two-year mortgage cost (24 x monthly payment + fees) comes to £24,673, while The Mortgage Works at 3.79 per cent adds up to £19,570 over two years—a saving of £5,103.
Lenders offer around 2,500 buy-to-let deals, but many mortgage terms are similar, reducing the choice for most landlords to a handful of loans.
The current cheapest buy-to-let mortgages for a £125,000 interest-only loan over 25 years against a £250,000 home:
LTV | Rate (Reverts to) | Type | Monthly cost | Fees | Lender |
65% | 3.74% (10.25% variable) | Two-year fix | £642 | £9,265 | Zephyr Homeloans |
65% | 3.79% (8.49% variable | Fixed until July 31, 2026 | £645 | £4,090 | The Mortgage Works |
70% | 3.84% (10.25% variable) | Two-year fix | £649 | £9,265 | Zephyr Homeloans |
75% | 3.84% (10.25% variable) | Two-year fix | £649 | £9,265 | Zephyr Homeloans |
75% | 3.89% (8.99% variable) | Fixed until July 31, 2026 | £652 | £4,090 | The Mortgage Works |
80% | 4.79% (8.69% variable) | Two-year fix | £716 | £3,949 | Suffolk Building Society |
One advantage of owning a buy-to-let property with a company is that landlords can still claim full-fat mortgage interest relief—that’s 100 per cent of loan interest.
Individuals can only set off 20 per cent of their interest payments as a tax credit for mortgage interest relief.
While property investors brace for another rent reform bill and a need to raise taxes on whichever party lands in Downing Street, there’s no guarantee that companies may lose their tax breaks as well.
However, forming a company to take existing buy-to-lets is fraught with tax problems and not a route for the faint-hearted.