In line with the expectation of many economists, the Bank of England has just announced a rise in the base rate of 0.25% taking it to 0.5%. Previously, in December 2021, we saw the first rate hike for more than three years when the base rate increased by 0.15%. This is largely due to inflation hitting its highest level in nearly 30 years – 5.4% in December 2021 – as many households feel the pinch from escalating grocery, fuel and energy bills.

Further activity is expected, with Bank of England policymaker Catherine Mann recently indicating that additional interest rate rises would be needed in the coming months. In the wake of the latest interest rate hike, and mounting speculation over future increases, what should advisers be doing to help landlord clients?

The first step is to engage with these clients ASAP to ensure they are in the best position to take advantage of some highly favourable lending conditions, as these may not last forever.
Choice is not an issue. 2022 began with 3,528 buy-to-let products on offer to landlords, the highest number recorded by Moneyfacts since September 2007.

The average overall two-year fixed buy-to-let -rate increased for the second consecutive month, rising by 0.04% to 2.94%, the highest this has been since September 2021. However, the average overall five-year fixed rate remained static at 3.18% since October 2021, despite fluctuations across the various five-year fixed averages at specific loan-to-values, the lowest recorded since August 2020 (3.06%).

Rates have been artificially low in recent times due to aggressive competition throughout the marketplace – especially for five-year fixes – but even this hotly contested lending arena is likely to succumb to rising rates in the coming weeks and months.

The five-year fix has fast become the go-to option for landlords who are looking to control costs and secure their outgoings whilst tapping into some historically low rates. And the time is right for many landlords to secure these highly competitive rates which are still on offer, for now at least.

From a CHL Mortgages perspective, we are seeing five-year fixes via a limited company vehicle make up a strong proportion of our lending and we fully expect to see this trend continue in 2022 as our distribution channels grow and our lending proposition evolves.

Ross Turrell is commercial director at CHL Mortgages