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How far will BTL mortgage rates go down this year?

Journalist: Andreea Dulgheru, Medianett Publishing

ended 19. January 2024

Over the last few weeks, several BTL lenders have announced rate reductions across their product ranges, with some BTL mortgage rates reaching 4% and sub-4%.

I'm looking to speak to mortgage brokers about these rate changes and the outlook for the BTL market this year:

  1. Do you expect BTL mortgage rates to go down even further? If so, how low do you expect BTL rates to reach this year?
  2. Following these rate changes, are you seeing landlords opt for shorter or longer-term fixed rates? Why?
  3. Are the lower BTL mortgage rates driving more activity in this market? 
  4. Do you expect these cheaper BTL mortgage rates to remain prevalent in the BTL market for the whole year, or do you think this is just a temporary “bubble” that will burst?
  5. If you do believe the latest BTL rate cuts are just temporary, when exactly do you expect rates to go up again, and how will this impact landlords who have gotten used to lower rates?

 

7 responses from the Newspage community

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Editor
Michelle Lawson
Director at Lawson Financial
Buy to Let mortgage rates have been reducing as lenders have a massive market which has been virtually dessimated thanks to the Government's relentless onerous tax and regulatory burdens that they have imposed over the years. Lenders still want to lend and borrowers want to borrow but with the rental coverage required it has become impossible for some. The rates are largely governed by the funders' appetite in the specialist arena but I think there will be more movement I am sure. The 5yr fixed rates are often the only routes that Landlords can take- whether they want to or not is another question.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
The recent buy to let mortgage rate reductions have been very welcomed by landlords who have been battered by regulation and taxation over the last several years. Many of these rate reductions though, have come with increased arrangement fees, so remortgaging is still impactful on the landlords margins therefore many are still optiing for 5 year fixed rates, so as to not have to review and incur additional costs every 2 years. The 5 year fixed rates also often have better stress testing calculations. These calculations base don recent rates have been prohibitive to remortgaging leaving many landlords with only the option of switching to a new product with their existing provider.
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Mark Andrews
Advisor at Finance Energy
I would expect BTL rates to continue to fall. They are directly related to the cost of borrowing for lenders and market stability so as these things improve the rates will follow. Borrowers are enquiring about two-year rates, but still opting for five because of a combination of affordability and portfolio management. It's not representative of the whole market but there is a lot of activity with professional landlords growing their portfolio. I think this was George Osbourne's intention.
Is the current downward trend here to stay? That is down to the wider economy but the signs are positive.
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Austyn Johnson
Founder at Mortgages For Actors
If we get in to the 3% range, landlords will step their game up and give the market a bit of a push. This will help out with inflation and targets within the mortgage world. Anything above 3% for a personal name BTL is not well received, its a shame, but although they take the rate, they would prefer a lower one to help with profit.
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Kim McGinley
Director & Specialist Broker at VIBE Finance
I believe that if anything we have learnt the last 18 months is to not get complacent! Anything can change at any time and we have forever been adapting as brokers navigating the market and guiding clients as best we can. It's great to see the rate decreases kicking off the new year but SWAP rates as we know can be volatile. I wouldnt say landlods are opting for longer term fixed rates currently with forecasts going into late 2024 and 2025 of rates continuing to reduce - only those that have to are taking longer term fixed rates where they often have no choice due to lenders affordability stress testing. I think the confidence will return more if we see the Bank of England get ballsy and implement the first BBR reduction since 2020! This I feel will really give the market an uplift that it needs and we need to remember the general election around the corner. The government are not going to want to go into an election on the back foot and so it will be very interesting!!
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Peter Stamford
Mortgage Expert at Stamford Home Finance
The recent buy-to-let (BTL) mortgage rate reductions have been a relief for landlords, especially after years of regulatory and tax pressures. However, these lower rates often come with higher arrangement fees, influencing many landlords to choose 5-year fixed rates over shorter terms to minimise recurring costs and benefit from more favourable stress testing calculations. Despite the rate cuts, stringent rental coverage requirements are making borrowing challenging for some. The market anticipates further rate declines, particularly if rates dip into the 3% range, which could invigorate landlord activity. Brokers remain cautious, aware of market volatility and the influence of external economic factors. I'm hoping a summer Bank of England base rate reduction and the upcoming general election could further stimulate the market.
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Richard Jennings CeMAP
Founder & Managing Director at Richard Jennings Mortgage Services
I believe that BTL rates will drop marginally further still, though not too significantly. What I do believe will happen is more lenders will hit the sub 4% mark which will drive up pricing competition amongst lenders. With that I'd expect rates to remain fairly static but a reduction in the upfront fees that are often prevelant with BTL rates. Lower rates with lower fees I think are needed to combat some of the losses landlord's are seeing from tenant payment difficulties and the continued erosion of profitability through taxation changes. Without some offerings to landlords then we could well see a mass exodus from the market which would have severe consequences for the housing market economic outlook.