Buy To Let mortgage rates have crept up since the Autumn Budget, a specialist lender says.
Octane Capital has analysed current BTL mortgage rates and changes seen over the last year.
In the run up to the Budget in October the average mortgage rate for a two year fixed-rate buy-to-let mortgage (75% LTV) had been falling, down from 4.83% in March to 4.22% in October.
In November this increased to 4.28%, before reducing very slightly to 4.26% in December.
However, the average 4.26% seen in December of last year was still considerably lower than the same month of the previous year when it sat at 5.40%.
In fact, the analysis by Octane shows that on average in 2024, the average buy-to-let mortgage rate was 4.53%. This is compared to an average rate of 5.47% seen over the course of the previous year (2023).
This reduction in buy-to-let mortgage rates has been driven by the swap rate market.
Throughout 2024, the average one year swap rate sat at 4.81%, down from 5.25% in 2023. At the same time, the average five year swap rate came in at 4.16%, down from 4.52% in 2023.
However, with soaring gilt yields, mortgage rates are expected to climb during the initial stages of 2025, although the wider expectation is that the increase in gilt yields currently being seen should subside if the Bank of England cuts interest rates again.
Jonathan Samuels, Octane Capital chief executive, says: “Many lenders are opting to take the hit on the margin in hopes of a future reduction. As a result, there remains a good level of opportunity for buy-to-let investors to secure a mortgage at a lower rate than they would have a year or so ago.
“However, the longer this goes on, the more likely they are to pass on this increased cost to borrowers via higher mortgage rates.
“Does this mean that the base rate will go up? Not necessarily. If mortgage rates increase it will push up inflation, but it will also weaken the economy. The Bank of England may be reluctant to put more stress into the economy by hiking rates, especially as growth is so limited, as this could actually push the UK into a recession unintentionally.
“So, if base rates are held, or even come down, lenders with variable rates linked to the base rate will likely look even cheaper compared to those fixed rates being priced off an increased swap rate and this is where investors should look when assessing their options for the year ahead.”
