Buy-to-let interest rates fall for large deposit mortgages

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Interest rates on buy-to-let mortgages are falling, but only for landlords who can put down a large deposit, reported This Is Money in 2017.

According to figures quoted by the website, the average two-year fixed rate for a mortgage deal with a 40% deposit has fallen from 2.59 % to 2.27% over the last 12 months. It is possible to find commercial mortgages with around 1.5% interest rate.

For a 30% deposit, the average interest rate is 3.17%, which is a rise from 3.02% since January 2017.

Landlords are faced with a decrease in tax relief on mortgage interest payments and are looking for low mortgage rates to make up for their extra costs. Provided they can afford large deposits, there are many low-cost commercial mortgage deals available for buy-to-let properties.

The agency chain Leaders claims that buy-to-let investments can still provide good returns from rental income and capital growth despite increased costs. Allison Thompson, the Managing Director of Leaders, said:

“Tax and stamp duty changes do not alter the fundamental factors that continue to make buy-to-let an incredibly attractive and rewarding market to investors.”

Thompson gave the example of purchasing a property for £100,000 in the Stoke-on-Trent area with a deposit of £30,000, and a mortgage for the remainder of the purchase price. Due to likely inflation in property prices, she calculated that by 2023, an investor could see a yield of 5% from income and the increases in the price of the property.

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