Buy-to-let mortgage rates see slight rise

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Even prior to the Bank of England’s interest rate increases, many buy-to-let commercial mortgage lenders had already increased their interest rates.

Data published by Moneyfacts, and covered in an October 2017 Telegraph article, showed that the average buy-to-let mortgage interest rate rose by 0.5% in October 2017 for a fixed two-year commercial mortgage. The average two-year fixed rate has risen from 2.79% in September 2017 to 2.84% in October 2017.

The average rate for a five-year fixed buy-to-let mortgage has risen by 0.1% to 3.44%.

Rates have risen because the cost of funding loans is more expensive for lenders. The Bank of England recently increased its base rate from 0.25% to 0.5%, which may cause further interest rate rises for buy-to-let landlords, but not by significant amounts.

Although the rise is small and unlikely to put landlords off purchasing properties, it could signal that interest rates could rise further. Rates are still relatively low, so landlords remain keen to apply for a new mortgage at current fixed term rates in order to beat future rate rises. Many lenders may take a while before raising their rates due to the Bank of England increase, but it is still advisable to contact a mortgage broker as soon as possible to apply for a commercial mortgage.

Landlords have faced increasing costs due to stamp duty increases and the reduction of tax relief on commercial mortgage interest payments. However, even with slightly increased interest charges, rented property investment in good locations can be profitable.

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