BTL mortgage costs at highest for two years, Moneyfacts finds

Data from Moneyfacts showed that the average two-year fixed buy-to-let (BTL) mortgage rate rose to 5.29% by 26 March, the highest for a year. Meanwhile, the typical five-year fixed rate was at 5.28%, the highest level in two years. 

Borrowing costs for a two-year fix are now £1,100 more than at the start of March, based on a £250,000 loan over a 25-year mortgage term. 

Rates below 5% are currently only available to landlords with significant equity or deposits, as pricing at 60% loan to value (LTV) was 4.93% for a two-year fix and 4.91% for a five-year fix. 

By comparison, the average two-year fixed rate at 75% LTV was 5.28%, or 5.83% at 80% LTV, while the five-year fixed equivalents were priced at 5.65% and 6.11% respectively. 

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BTL mortgage choice falls 

Moneyfacts’ research found there were fewer BTL mortgages available, with a total of 4,332 fixed and variable deals on the market. 

Options have fallen across all LTV tiers, but landlords in need of a 75% LTV mortgage suffered the greatest loss, as products dropped from 2,416 to 1,743 over the month. 

The product count at 80% LTV fell from 643 to 489, while options at 60% LTV shrank from 272 to 204. 

Positive sentiment has been “shattered” 

Rachel Springall, finance expert at Moneyfactscompare.co.uk, said soaring costs would “cause pain” to landlords this year. 

Springall said: “This is terrible news, as rising costs could lead to higher rental payments for tenants, or a drop in the pool of properties available for rent if landlords decide enough is enough and sell off their portfolio. 

“The unrest in the Middle East has caused absolute mayhem in the residential mortgage market, BTL rates are also being hiked, and hundreds of deals have been pulled from sale.” 

Springall said the positive sentiment felt at the start of the year had been “shattered”, as landlords not only have higher borrowing costs but also the Renters’ Rights Bill to prepare for. 

“It is entirely possible that landlords may have to take on an additional loan to cover refurbishment costs, to ensure they abide by the Decent Homes Standard, which is set out in the Renters’ Rights Bill,” she added. 

Springall said it was essential for tenants to feel safe and secure in their homes, and even more necessary for homes to be energy efficient to counter rising costs. 

Springall added: “Thankfully, lots of progress would have been made to make private lets more energy efficient over the past six years, under the Minimum Energy Efficiency Standard (MEES) regulations, whereby landlords have been prohibited from letting properties with an EPC rating below E.

“However, landlords’ costs will escalate further, as they are expected to invest up to £10,000 as a spending cap to reach an EPC rating of C by October 2030, subject to the value of a property. If that EPC rating is not achieved, landlords could face substantial fines, as the rules apply to all tenancies. Seeking advice will be essential for new or existing landlords to keep on top of the changing legislation and how rising costs and interest rate rises will hit their profit margins.”