BTL Interest Rates To DOUBLE? Here’s why landlords should remortage now

Stewart is an Independent Mortgage Broker with over twenty years of experience in the industry and has advised our clients for a couple of years now. He’s kindly shared a few thoughts regarding the current state of the buy-to-let mortgage market and potential opportunities for our clients new and old:

In the 20+ years I have been advising my clients on their mortgage needs, I have never seen buy-to-let interest rates as they are appearing now with fixed rate deals being the same as residential mortgage rates.

In the past all mortgage lenders have detailed that they assess their interest rates based on the risk the sector represents to their business and therefore have always offered mortgage interest rates at a higher level for buy-to-let properties than residential, and on average these buy-to-let rates have been 1% – 1.25% higher, the logic being that if the property was being rented out then the risk of the mortgage not being paid was higher than if the mortgage was being paid by a resident property owner.

All perfectly sensible you may think, and this was the way the mortgage lenders operated offering higher interest rates for buy-to-let mortgages.

However, over the last 6 months what we have seen is a change in policy with buy-to-let interest rates now being on parity with residential interest rates which means there are currently still some really competitive fixed-interest rates available in the market place, but how long these rates will last is anybody’s guess with inflation currently running at 9.4% in the UK with talk of it hitting 11% by the end of the year, as well as the Bank of England’s remit being to keep this figure at 2%.

I foresee interest rates at least doubling what they are now by this time next year. So, whilst you are currently looking at interest rates of about 3.5% for a 5-year fixed rate deal this could be closer to 7% next year and with no signs to when rates will come back down again.

With this in mind we have had buy-to-let clients who have fixed rate mortgage deals finishing next year ‘biting the bullet’ now and securing a 5-year fixed rate scheme whilst interest rates are still relatively low, even if this has meant incurring a redemption penalty.

Whilst we would never normally recommend incurring a penalty, we are advising our clients to at least look at their buy-to-let property portfolios to see if there are any opportunities to remortgage any of their mortgage deals.

Green mortgage deals are also now being sold by the mortgage lenders either in the form of a mortgage or further advance. If your buy-to-let let property has an EPC rating of ‘C’ or above it may qualify for a green mortgage with lenders which have  a lower interest rate than normal standard buy-to-let let mortgages.

Even if your property is not this energy efficient you could apply for a green further advance mortgage with your current lender, who may offer you money to make your property more energy efficient in the future. With climate change currently in the headlines this is something seriously to think about and are relatively straight forward to set up. This could in turn make your property more desirable for tenants and could help you achieve a higher rentable rate on the back of this as the cost-of-living bites.

If you’d like to have a chat with Stewart regarding your buy-to-let or residential mortgages then please get in touch with me on the details below and we’ll make the introductions.Stewart is an Independent Mortgage Broker with over twenty years of experience in the industry and has advised our clients for a couple of years now. He’s kindly shared a few thoughts regarding the current state of the buy-to-let mortgage market and potential opportunities for our clients new and old:

In the 20+ years I have been advising my clients on their mortgage needs, I have never seen buy-to-let interest rates as they are appearing now with fixed rate deals being the same as residential mortgage rates.

In the past all mortgage lenders have detailed that they assess their interest rates based on the risk the sector represents to their business and therefore have always offered mortgage interest rates at a higher level for buy-to-let properties than residential, and on average these buy-to-let rates have been 1% – 1.25% higher, the logic being that if the property was being rented out then the risk of the mortgage not being paid was higher than if the mortgage was being paid by a resident property owner.

All perfectly sensible you may think, and this was the way the mortgage lenders operated offering higher interest rates for buy-to-let mortgages.

However, over the last 6 months what we have seen is a change in policy with buy-to-let interest rates now being on parity with residential interest rates which means there are currently still some really competitive fixed-interest rates available in the market place, but how long these rates will last is anybody’s guess with inflation currently running at 9.4% in the UK with talk of it hitting 11% by the end of the year, as well as the Bank of England’s remit being to keep this figure at 2%.

I foresee interest rates at least doubling what they are now by this time next year. So, whilst you are currently looking at interest rates of about 3.5% for a 5-year fixed rate deal this could be closer to 7% next year and with no signs to when rates will come back down again.

With this in mind we have had buy-to-let clients who have fixed rate mortgage deals finishing next year ‘biting the bullet’ now and securing a 5-year fixed rate scheme whilst interest rates are still relatively low, even if this has meant incurring a redemption penalty.

Whilst we would never normally recommend incurring a penalty, we are advising our clients to at least look at their buy-to-let property portfolios to see if there are any opportunities to remortgage any of their mortgage deals.

Green mortgage deals are also now being sold by the mortgage lenders either in the form of a mortgage or further advance. If your buy-to-let let property has an EPC rating of ‘C’ or above it may qualify for a green mortgage with lenders which have  a lower interest rate than normal standard buy-to-let let mortgages.

Even if your property is not this energy efficient you could apply for a green further advance mortgage with your current lender, who may offer you money to make your property more energy efficient in the future. With climate change currently in the headlines this is something seriously to think about and are relatively straight forward to set up. This could in turn make your property more desirable for tenants and could help you achieve a higher rentable rate on the back of this as the cost-of-living bites.

If you’d like to have a chat with Stewart regarding your buy-to-let or residential mortgages then please get in touch with me on the details below and we’ll make the introductions.