Buy-to-let mortgage rates have been causing concern among property investors, with a sharp increase following the government’s mini-budget last September. Although these rates had gradually been declining in recent months, they have now resumed their ascent.
The unexpected surge in inflation has further intensified predictions that the Bank of England will have no choice but to raise interest rates even more to counter rising prices.
Currently standing at 4.5%, the base rate plays a crucial role in determining mortgage rates. It has experienced a staggering 12 consecutive increases and is now anticipated to reach 5.5% later this year.
Consequently, numerous lenders pulled buy-to-let mortgage offers by the end of May and reintroduced products with higher interest rates.
Data analysts Moneyfacts indicate that the average fixed-rate deal at the beginning of June stood at 5.81%. In May, that figure was 5.56%.
The question remains: will buy-to-let rates become more affordable?
As is the case with homeowner loans, the future state of the market is challenging to predict. However, given the heavy influence of the base rate on mortgage rates, it is likely that rates will continue to climb.
This will undoubtedly impact landlords when it comes to remortgaging. Landlords with expiring fixed-rate deals secured when rates were considerably lower may face a financial shock when refinancing to a new deal.
Currently, landlords have a choice of 2,315 mortgage deals, including a range of smaller deposit options, allowing for up to 80% loan-to-value (LTV).
While average rates provide a general overview of the market, individuals seeking a mortgage should prioritize securing the most cost-effective deal available.
Although deals may appear inexpensive compared to a few months ago, it is important to consider the overall cost of the mortgage, including substantial upfront fees that can amount to thousands of pounds.
Alarming statistics reveal that in 2022, landlords sold 35,000 more properties than they purchased. Last year, the rental sector experienced an average daily loss of 66 properties, according to agents Hamptons.
Hamptons’ analysis also indicates that in 2022, 140,000 individuals stopped being landlords, with a projected 96,000 set to follow suit annually over the next five years as portfolio holders approach retirement age.
Nevertheless, despite the high mortgage rates, demand for rental properties remains robust. Consequently, landlords may choose to persist in the market.
Research conducted by mortgage firm Landbay reveals that seven out of ten buy-to-let landlords have no intentions of selling any of their properties in 2023.