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Buy to let mortgage rates are falling: could you be a landlord in 2020?

Buy to let mortgage rates are lower now than in autumn 2019, with the downward trend in rates for fixed-rate deals set to continue into 2020. This is increasingly likely, given the strong possibility of a further base interest rate cut by the Bank of England.

Those looking to take out their first buy-to-let mortgage and existing landlords looking to remortgage will find themselves in an auspicious environment this year, as lenders compete for business for a reduced number of applicants. The very best rates for buy-to-let mortgages are currently to be had within the two-year and five-year fixed rate deals with at least a 50-per-cent LTV (loan-to-value) ratio, but rates are falling across the board.

The absolute best buy-to-let mortgage deal is available from The Mortgage Works who are offering an incredibly low rate of just 1.74 per cent on 75 LTV purchases, as well as £250 cashback. Landlords looking to make improvements to their buy-to-let properties in order to make the new mandatory energy efficiency standards will no doubt welcome this extra cash. Under new EPC rules, a property has to have an energy efficiency rating of at least an ‘E’ to be considered suitable for renting.

So, is taking out a buy-to-let mortgage still a good idea in 2020? Absolutely, and as the number of people renting is only going to increase, buy-to-let is always going to be a worthwhile investment. And while the old tax relief rules are being phased out this year, the changes will have a significant effect only on those in higher tax brackets (40–45 per cent), with those letting out one or two properties unlikely to see any significant changes to their outgoings. The new rules have been introduced to try and curb the amount of tax relief claimed by the highest-earning landlords (think people with huge property portfolios). Any changes in the amount of tax paid by regular landlords should be offset by remortgaging to a lower fixed rate.


Source: Real Homes

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Andrew Turner: Buy-to-let mortgage rate rises expected

Buy-to-let mortgage rates are expected to rise so landlords should take advantage of the current low rate deals while they are still available, Andrew Turner, chief executive, at specialist buy-to let broker Commercial Trust, has argued.

He said at the moment there are some historically low rates for both tracker and fixed rate buy-to-let mortgage products.

Turner said: “This has been the case for some time and is reflective of a hugely competitive market place, where lenders are trying to outdo one another with enticing mortgage deals, encompassing low rates, low fees, or incentives such as cash-back or free valuations.

“With over 2,000 products in the buy-to-let marketplace it is clear that there is a myriad of choice for investors. This volume of choice brings with it complexity, where the lowest rate does not necessarily equate to the cheapest overall deal.”

The Bank of England’s Monetary Policy Committee (MPC) has implemented two base rate rises in the last 12 months, yet the added cost to lenders has not shown itself in any significant way in the deals they are offering.

Turner added: “In my view this will have to change. The bumpy road of Brexit may see the base rate brought down slightly, once things settle, but I think it is unlikely and in any event, there is not too much scope for reduction.

“My view is that the overall picture for the next decade is a gradual upward trend in rates.”

UK Finance buy-to-let data shows strength in remortgaging, whilst the changes in buy-to-let have tempered purchases somewhat.

In November, its statistics indicated that buy-to let remortgaging activity in 2018 would exceed its forecasts by approximately £3bn, while a similar figure would represent a shortfall in its forecasts for buy-to-let purchase business in the year.

Turner said: “It can be no coincidence that there has been a surge in landlord activity around buy-to-let remortgages, with such uncertainty affecting their businesses.

“For this reason, if you are concerned that rates are set to trend upwards, fixing now at a competitive low rate and for a period suited to you, could bring you a great deal of security through turbulent times.”

Source: Mortgage Introducer