If you’re seeking to expand or refinance your buy-to-let portfolio this year, you may be enticed by the promise of introductory rates well below 2% – but how likely are you to secure one of these simple deals?
Fixed-rate mortgages are attractively priced right now, but lenders are imposing strict rules on who are able to apply for the very best offers, with portfolio landlords and higher-rate taxpayers in danger of really missing out.
Here, you can get to grips using the best-priced deals for landlords and find out about the factors affecting your type of loan.
Buy-to-let lenders cut costs
The start of the year could be a confusing time in the mortgage market as lenders chop and alter their offers, and that’s certainly the situation within the buy-to-let sector.
This week alone, there has been a swathe of product launches, withdrawals, extensions and changes to fee structures, but the great news is the fact that some lenders are lowering rates.
Digital lender Molo, which launched its first products for investors last November, cut the introductory rate on its five-year fix by 0.31% earlier this week – bringing it right down to 2.57%.
And several other lenders have followed suit in the last few days, including Axis Bank (cuts as high as 0.25% on fixes), Loughborough (cuts of 0.2% on discounted variable products) and Principality (cuts of up to 0.1% on fixes).
Are buy-to-let mortgages cheap?
Yes and no. Based on Moneyfacts, fixed-rate products were priced at typically 3.3% in January, the greatest level seen since June 2022.
That’s certainly not reason to be concerned, however, because this figure is just 0.18% more than last year’s low of 3.12%. And in that time, the financial institution of England base rate increased by 0.25%, an issue that has a tendency to push-up mortgage costs.
Are landlords fixing for extended?
There will also be signs that landlords are still mainly searching for five-year fixes, which remain attractively priced.
A report from Mortgages for Business the 2009 week demonstrated that a remarkable 84% of landlords chosen these products within the final quarter of 2022.
At the same time, variable rate deals have almost entirely fallen out of favour, with 97% of landlords selecting a fix instead.
Lowest rates on buy-to-let mortgages
It’s one thing to take a look at average prices, but where can landlords discover the lowest home loan rates?
The chart below shows the least expensive introductory rates currently on the market, with two-year fixed-rate deals at 60% loan-to-value (LTV) available as little as 1.49%.
A word of caution, however. While initial minute rates are important, you should always element in the total cost of deals rather than their rates alone. A few of the ‘cheapest’ mortgages include high upfront fees, driving in the overall cost.
60% LTV
| Type | Lender | Initial rate | Revert rate | APRC | Fees |
| Two-year fixed | Sainsbury’s Bank | 1.49% | 5.24% | 4.5% | lb1,995 |
| Three-year fixed | Virgin Money | 1.83% | 5.19% | 4.7% | lb1,995 |
| Five-year fixed | Skipton | 2.02% | 5.19% | 4.3% | lb1,995 |
70% LTV
| Type | Lender | Initial rate | Revert rate | APRC | Fees |
| Two-year fixed | Sainsbury’s Bank | 1.7% | 5.24% | 5% | lb1,995 |
| Three-year fixed | Coventry | 2.19% | 4.99% | 4.5% | lb1,999 |
| Five-year fixed | Principality | 2.4% | 5.05% | 4.4% | lb1,395 |
80% LTV
| Type | Lender | Initial rate | Revert rate | APRC | Fees |
| Two-year fixed | The Mortgage Works | 2.99% | 5.54% | 5.4% | 2% of loan |
| Three-year fixed | Loughborough | 3.09% | 5.34% | 5% | lb999 |
| Five-year fixed | Loughborough | 3.39% | 5.34% | 4.8% | lb999 |
Can you connect to the cheapest rates?
The tables above show the least expensive initial rates on the market, however that not everyone is prone to qualify for these deals.
Indeed, the speed you’ll be offered will be heavily influenced by the status of your portfolio, with particular concentrate on the number of properties you already own and how heavily mortgaged they're.
The number of properties you own
The number of properties you own has a significant effect on the deals that available to you, with portfolio landlords (those who own four or more properties) locked out of some the lowest-cost products.
For example, the chart-topping Sainsbury’s mortgage mentioned previously (two-year fix at 60% LTV) is only available to landlords with a more three properties.
In addition, the lending company only allows applications from investors who've an optimum total borrowing exposure of lb2m.
This means landlords with bigger portfolios will want to look to specialist lenders such as The Mortgage Works, which offers loans for portfolios as high as 10 properties.
Your lender’s maximum interest cover ratio
Interest cover ratios (ICRs) play a key role in whether lenders will accept your application.
It works such as this: the ICR shows the minimum rental income your home must generate when set against your mortgage payments.
For example, the Sainsbury’s deal above comes with an ICR of 125% for remortgagers or borrowers who are basic-rate taxpayers.
Higher-rate taxpayers already seeing their profits eroded by changes to mortgage interest tax relief, meanwhile, face a higher rate of 145%.
ICRs vary significantly from lender-to-lender and deal-to-deal, so it will help get advice from a mortgage broker which lenders are most likely to simply accept your application.
How many landlords have mortgages?
Earlier now, the federal government released the English Private Landlord Survey, which asked nearly 8,000 landlords in England about their experiences in the buy-to-let sector.
The report found that more than half of landlords (55%) have a minumum of one mortgage on a buy-to-let property.
There were also indications those with mortgages were suffering the most from the introduction of new buy-to-let regulations.
Indeed, the survey discovered that mortgaged landlords were much more likely (70%) to think about reducing their portfolios due to legislative changes than unmortgaged landlords (34%).
Advice on getting a buy-to-let mortgage
If you’re considering expanding your portfolio or simply refinancing your present mortgage, it can help to obtain advice from a whole-of-market large financial company.
