Buy-to-Let Mortgage Rate Trends in 2023

Bank of England officials have lifted their foot off the interest rise pedal by keeping rates at 5.25 per cent until February.

From December 2021, the Bank lifted the rate 14 months before settling on the current rate in August.

The next rate-setting monetary policy committee meeting is on February 2, leaving some extra breathing space for mortgage payers.

Property investors have seen buy-to-let mortgage rates float down in the last three months of the year, but they are still much higher than 12 months ago.

The market is a tale of two rates - fixed rates have dipped while variable rates have remained stubbornly higher.

Fixed rates fall

The latest data from November shows average fixed rates were 6.22 per cent, while variable rates stood at 6.78 per cent.

The average fixed rate swung between 4.38 per cent in August 2022 and a high of 6.79 per cent in August 2023. Since then, the rate has fallen to 6.22 per cent but is still significantly above the recent low of 5.56 per cent in May 2023.

Although the fixed rate has swung up and down, the variable rate has maintained an upward trajectory.

In August 2022, the rate was 3.64 per cent, climbing every month to 6.78 per cent.

Overall, mortgage lender trade body UK Finance says rate uncertainty has seen buy-to-let borrowing to buy homes to rent collapse by 53 per cent in 2023 to £8 billion.

How interest rates have changed

Source: Bank of England

Landlords borrowing less

The gloom will continue into 2024, says the body, with borrowing to fund new homes to rent falling another 13 per cent to £7 billion.

The figures suggest that landlords are sitting tight and declining to invest in expanding their portfolios.

This will likely put more pressure on the market next year unless tenant demand drastically falls, as a shortage of homes to let is already forcing rents up.

At the same time, UK Finance has observed first-time buyers and movers are applying for fewer mortgages, with home purchase loans falling by 23 per cent to £130 billion in 2023, with a further eight per cent drop to £120 billion forecast for next year.

Best buy to let mortgage deals

Mortgage market monitor Moneyfacts says the best two-year fixed rate loan is from The Mortgage Works at 4.19 per cent (APR 8.3 per cent) at 65 per cent loan-to-value (LTV) to borrow £150,000 on a home valued at £250,000.

Other buy-to-let deals include:

• 5.29 per cent (APR 6.8 per cent) for a three-year fixed rate at 95 per cent LTV from Accord Mortgages
• 4.39 per cent (APR 8.1 per cent) on a five-year fixed-rate deal at 65 per cent LTV from The Mortgage Works

Best buy to let variable rates start at 5.40 per cent (APR 8.9 per cent) at 75 per cent LTV.

Corporate two-year fixed-rate mortgages for buy-to-let start at 5.19 per cent from The Mortgage Works and 3.99 per cent from LendInvest, both at 75 per cent LTV.