October 29, 2024 2:00 pm

Insert Lead Generation
Nikka Sulton

Buy-to-let fixed mortgage rates have reached their lowest levels since early September 2022, according to the latest analysis from Moneyfactscompare. This decline in rates presents a potential opportunity for landlords looking to refinance or invest in new properties. 

However, the analysis also issues a warning that tomorrow’s Budget may introduce tax changes that could negatively impact landlords. With the government seeking to balance its finances, many landlords are concerned that new tax measures could erode the benefits of these lower mortgage rates. 

Currently, average fixed rates for both two- and five-year terms have fallen month-on-month, consistently remaining below 6% since the start of 2024. This trend highlights a shift in the market, as rates now sit at their lowest levels since September 2022, just before the widely discussed fiscal announcement by former Prime Minister Liz Truss. 

As landlords weigh their options, the interplay between favourable mortgage rates and potential tax implications will be crucial in their decision-making process moving forward.

The overall availability of buy-to-let mortgage products, including both fixed and variable options, has seen a notable increase month-on-month. This rise in product availability not only reflects a growing market but also indicates a wider range of choices compared to last year. In fact, the selection of buy-to-let products has reached its highest level in over two years. A closer examination reveals that there has been a month-on-month increase of 40 five-year fixed deals and an additional 47 two-year fixed deals, highlighting the competitive nature of the market.

Rachel Springall, a finance expert at Moneyfactscompare, shared her insights on this development: “The buy-to-let market has encountered various challenges in recent years, including fluctuations in interest rates and regulatory changes. However, landlords may find it encouraging to see that fixed interest rates have been on a downward trend, making it more affordable to borrow. Furthermore, the increased availability of mortgage options means that landlords now have more products to choose from, as lenders adjust their offerings to meet the evolving demands of the market. This trend not only benefits existing landlords but may also attract new investors looking to enter the buy-to-let sector, providing a much-needed boost to the rental market overall.”

These developments are encouraging for potential landlords, but it’s essential to consider a range of factors before venturing into the buy-to-let market, as the decision should involve more than just the mortgage costs. The margin for profit derived from rental income may turn out to be tighter than initially expected. Nonetheless, property investment is still generally regarded as a stable long-term investment, particularly in a fluctuating economic environment.

Recent tax changes have significantly reshaped the buy-to-let landscape, prompting many landlords to establish limited companies to manage their property portfolios more effectively. This shift reflects a broader trend in the market; data from Hamptons estate agents indicates that the number of limited companies set up between January and September of this year was 23% higher than the same period last year. Furthermore, a striking 70% of new buy-to-let purchases in England and Wales are now being made through limited companies, highlighting a significant transformation in how landlords are structuring their investments. 

While these changes may present new opportunities, landlords must also remain vigilant about potential risks and challenges, such as changing regulations and economic uncertainties that could impact rental yields and property values in the future. Balancing the potential rewards against these considerations will be crucial for anyone looking to succeed in the buy-to-let sector.

Landlords may find themselves in a difficult position if the planned rollback of stamp duty relief occurs next year. This could lead to reduced profits, prompting some landlords to sell their properties, resulting in a significant number of sales. This might happen as they seek to take advantage of the current market conditions before a potential increase in capital gains tax (CGT) rates.

There is considerable uncertainty surrounding the upcoming Budget, and landlords will be closely monitoring any developments. Lenders may also adjust their fixed-rate pricing in the coming weeks due to fluctuations in swap rates. For landlords concerned about their financial situation, it would be prudent to seek independent advice to navigate current market conditions and explore the latest refinancing options if their mortgages are due for renewal in the near future.

 

Buy-to-let market analysis
Product numbers Oct-22 Oct-23 Apr-24 Sep-24 Oct-24
BTL product count (fixed and variable) 988 2,581 2,883 3,186 3,277
Two-year fixed rate BTL all LTVs 183 773 947 1,100 1,147
Two-year fixed rate BTL at 60% LTV 35 67 72 77 86
Two-year fixed rate BTL at 75% LTV 84 379 398 514 556
Two-year fixed rate BTL at 80% LTV 28 97 136 130 150
Five-year fixed rate BTL all LTVs 375 1,136 1,270 1,399 1,439
Five-year fixed rate BTL at 60% LTV 36 81 81 93 92
Five-year fixed rate BTL at 75% LTV 197 613 574 698 742
Five-year fixed rate BTL at 80% LTV 52 85 141 145 162
Average rates Oct-22 Oct-23 Apr-24 Sep-24 Oct-24
Two-year fixed rate BTL all LTVs 5.57% 6.40% 5.52% 5.35% 5.24%
Two-year fixed rate BTL at 60% LTV 4.52% 6.09% 5.21% 4.86% 4.67%
Two-year fixed rate BTL at 75% LTV 5.41% 6.40% 5.56% 5.37% 5.25%
Two-year fixed rate BTL at 80% LTV 6.74% 6.95% 6.22% 6.08% 5.88%
Five-year fixed rate BTL all LTVs 6.05% 6.32% 5.52% 5.33% 5.24%
Five-year fixed rate BTL at 60% LTV 4.26% 5.70% 4.81% 4.65% 4.45%
Five-year fixed rate BTL at 75% LTV 6.04% 6.36% 5.54% 5.38% 5.29%
Five-year fixed rate BTL at 80% LTV 7.10% 6.84% 6.19% 6.01% 5.85%

 

 

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