Good news for landlords: Five-year buy-to-let mortgage rates hit record lows

If you’re a landlord whose fixed-rate mortgage is coming to an end, or you are thinking about investing in the rental market with a buy-to-let mortgage, then you’ll be pleased to learn five-year buy-to-let (BTL) mortgages are back to record lows.

Data from Money Facts shows that the average five-year, fixed BTL mortgage rate has returned to the record low of 3.43%, last seen in October 2017. The fall in BTL fixed five-year rates has been linked with the changes made to stamp duty made in April 2016. Many landlords quickly purchased property before the stamp duty changes were made, which might have meant they had to pay an additional 3% on stamp duty for purchases made after April 2016.

As Money Facts notes, landlords who took out a two-year fixed BTL mortgage at the time will now be coming to the end of their term, meaning there’s plenty of business to be had for lenders, hence the rush to offer lower rates on five-year fixed terms.

Charlotte Nelson, finance expert at Money Facts, says lenders could be focusing on five-year fixed rates instead of two-year products due to “stress-testing” reasons.

“The stress test that is applied to two-year fixed rates does not apply to five-year deals,” Charlotte Nelson explains.

In November last year, it was reported that homeowners were rushing to fix their mortgage rates on five-year deals due to concerns that the Bank of England was to hike interest rates. In November, the Bank of England raised interest rates for the first time in a decade, from 0.25% to 0.5%.  Figures show that in October 2017 around 42% of homeowners re-mortgaging opted for five-year fixed rates, contrasting to just 9% of those previously re-mortgaging who opted for long-term deals.

As the price war on low-interest mortgages shows little signs of abating, amongst a climate of interest rates uncertainty, fixing buy-to-let mortgages for five years on low interest deals is undoubtedly attractive to landlords.