Across the mortgage market, lenders are in fierce competition to offer more affordable products, and buy-to-let mortgage rates continue to drop. Currently, average buy-to-let mortgage rates are lower than their residential counterparts, as more lenders strive to enhance their offerings, despite uncertainty about a potential rate cut next month.
Recently, Nationwide made headlines by reducing its five-year fixed-rate mortgage with a 60% loan-to-value (LTV) to just 3.99%, plus a fee. This move could intensify the ongoing “rate war” among lenders ahead of the Bank of England’s next base rate decision in August.
Loans for those with smaller deposits are also becoming more affordable, which may positively impact the broader market in terms of affordability. Meanwhile, buy-to-let mortgage rates have quietly declined as well. As of July 16, data from Moneyfacts shows the average rate for landlords is 5.45% for a two-year fixed term and 5.51% for a five-year fixed term, slightly below the average homeowner mortgage rates in the same category.
Even More Affordable Buy-to-Let Mortgage Rates
The prospect of more affordable buy-to-let mortgage rates is welcome news for many landlords. Rates had peaked at a 14-year high after the Bank of England increased its base rate to 5.25%. Although borrowing remains pricier than before, many lenders have introduced cheaper products as the year has progressed.
The Bank of England’s next interest rate decision largely depends on inflation, but analysts suggest that the Monetary Policy Committee might opt to maintain the rate until the economic outlook stabilizes. Nonetheless, lenders are eager to stimulate the market and attract borrowers, with numerous institutions announcing lower rates in recent weeks.
For example, The Mortgage Works now offers buy-to-let mortgage rates starting as low as 3.54%, having reduced select rates by up to 0.25 percentage points. Major international banks like HSBC and Virgin Money have also cut their buy-to-let rates, while NatWest, Co-op Bank, and Accord Mortgages joined the trend last week with more competitive rates.
When Will the Next Interest Rate Cut Be?
The Monetary Policy Committee (MPC) of the Bank of England is set to meet on August 1 to decide on the base rate, voting to increase, decrease, or maintain it. While lenders are not solely driven by this decision, it does have an impact, so it’s notable to see many lenders lowering their rates ahead of the announcement. A growing number of experts, however, suggest that a rate cut is more likely in September.
“Mortgage rates could fall further, but it is difficult to tell how quickly and by what margins,” said Rachel Springall from Moneyfacts. She added, “Those waiting for the Bank of England to cut the base rate may hope for August, but opinions are divided among economists, with many pointing to September due to persistent service inflation.”
Ashley Webb, an economist at Capital Economics, stated, “While the easing in wage growth in May aligned with expectations, it likely doesn’t offset the recent overshoot in services inflation. As a result, we have adjusted our forecast for the first interest rate cut from August to September, although it is a close call.”
As lenders continue to compete in buy-to-let mortgage rates and offers for landlords, those looking to remortgage or take out new loans are encouraged to keep an eye on the market as another rate cut approaches.
