Buy-to-let mortgage rates have fallen to their lowest levels since September 2022 but record product choice is being overshadowed by rising financial pressures and the prospect of fresh tax reforms.
According to Moneyfactscompare.co.uk, the average 2-year fixed buy-to-let rate dropped to 4.88%, down from 6.64% last year and 5-year fixes now average 5.21%, edging lower than 5% earlier this summer.
Overall buy-to-let product availability has climbed to 4,597, the highest since records began in 2011, with particularly strong growth in 75% and 80% loan-to-value (LTV) deals.
CHALLENGING SITUATION
Rachel Springall, finance expert at Moneyfacts, said the shift offered some relief for landlords refinancing: “Those landlords who locked into a fixed rate deal in 2023 and are due to refinance will find the average two-year fixed rate has fallen from 6.64% to 4.88%.
“However, the cost of finance is a fundamental part of becoming a landlord, as tax changes over the years have led to a more challenging situation for investors to hit desirable profit margins.”
Despite the improved rate environment, landlords face mounting uncertainty. The government is rumoured to be considering new tax measures in the upcoming Budget, including a possible National Insurance Contributions levy on rental profits for landlords operating outside limited companies.
COMPANY BUY-TO-LET
Analysts expect such a move would accelerate the trend of landlords incorporating, a shift already identified by Hamptons as dominant among newer investors.
Meanwhile, pressures on existing portfolios are evident. UK Finance data show buy-to-let repossessions rose 11% year-on-year. A survey by the National Residential Landlords Association found 26% of landlords sold at least one property in 2024, while just 8% bought.
Regulatory change also looms large. The Renters’ Rights Bill proposes abolishing Section 21 “no-fault” evictions and introducing a new Decent Homes Standard, further tightening compliance requirements.
For many landlords, falling mortgage rates may not be enough to offset tax, regulatory, and profitability concerns — raising the risk of further landlord exits from the private rented sector.
ANOTHER BLOW
Megan Eighteen, President of ARLA Propertymark, added: “Landlords leaving the market is a continuous trend and is pushing up rents for tenants due to a growing supply and demand imbalance.
“Ultimately, it’s positive to see there is a glimmer of hope for those landlords looking to take out a buy-to-let mortgage as they become the most affordable they’ve been in years.
“However, successive governments have placed pressure on many other areas of a landlords finances for decades, and with the news of yet another blow for investors due in the upcoming Budget, the future of the private rented sector is concerning.
“We need to value every part of our housing ecosystem as the fundamental issue to tackle is the lack of homes for the nation. Many people rely on their rental home and if we’re not careful in ensuring a healthy and sustainable mix of homes of all tenures, many could find it increasingly difficult and unaffordable when looking to move.”
