Buy-to-let mortgage choice at record high

Buy-to-let landlords have 4,144 deals to choose from – signifying an increasingly competitive market among lenders, Moneyfacts analysis shows.

Correspondingly average rates are down for the fourth consecutive month, bringing the typical 2-year fix to 4.98% and the average 5-year fix to 5.29% across all LTVs.

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Landlords searching for a new buy-to-let mortgage may be pleased to see a rise in product availability, with the choice of deals soaring to its highest point on record.

“Borrowers concerned about interest rates may also find it encouraging to see the average two-year fixed buy-to-let rate has fallen below 5% for the first time since September 2022 and both the two- and five-year fixed rates have fallen for the fourth consecutive month.

“The average five-year fixed buy-to-let rate is now at its lowest level in over six months, but year-on-year the rate has not dropped as viciously as its two-year counterpart.

“Lenders monitor swap rates to gauge future rate expectations, and when they drop it encourages mortgage rate cuts. Lower buy-to-let rates might create a positive sentiment for new and existing landlords, however, there will be immense pressure on some to turn around a profit in the future.”

There are more 5-year fixed rates than 2-year, at 1,733 versus 1,419, while the majority of products are in the 75% LTV category.

For landlords who have already built up significant equity, 60% LTV 5-year fixed rates average at 4.51%, while 2-year rates stand at 4.46%.

Springall added: “Landlords coming off a low-rate fixed deal and needing to refinance will see increasing rents as the easiest way to boost margins.

“Landlords will also need to keep in mind the Renters Right Bill which is expected to come into force either later this year or in 2026. The new laws include abolishing section 21 evictions and fixed-term tenancies, but also new rules on making rent increases.

“The legislation is designed to protect millions of renters, giving them more security, but understandably this might be the final straw for existing landlords, leading to them exiting the sector. Seeking advice before buying any property, such as the workings of setting up a limited company is essential.

“It is also vital for prospective investors to weigh up the costs involved in entering the buy-to-let market, such as the minimum 5% surcharge on Stamp Duty Land Tax (SDLT).

“An investment in property is more than aiming for a monthly profit, it’s important to understand the longer-term returns of selling the asset, and the tax implications of selling up.”