Buy-to-let rates drop to two-year low: Moneyfacts

Buy-to-let fixed rates have fallen to their lowest since the start of September 2022, according to the latest analysis by Moneyfactscompare.

Average fixed rates over two and five-year fixed terms fell month-on-month and have remained below 6% since the start of 2024. The average two-year fixed rate across all LTVs is now 5.24%, with the average 60% LTV rate down to 4.67%. Average five-year fixes are at 5.24%, with 60% LTV rates at an average of 4.45%.

These rates now sit at their lowest levels since the start of September 2022, before the Truss government's mini-Budget.

In addition, overall buy-to-let product availability (fixed and variable) rose month-on-month to 3,277 products. Product choice is greater year-on-year, and is at its highest level for over two years. Deeper analysis shows a month-on-month rise of 40 five-year fixed deals and 47 two-year fixed deals. 

Rachel Springall, finance expert at Moneyfactscompare, said: “The buy-to-let market has had its fair share of challenges over the years, so landlords might find it encouraging to see fixed interest rates have been on the downward trend. There are also many more deals for borrowers to choose from, as lenders have been adjusting their ranges to accommodate demand. These are positive signs for prospective landlords, but there are numerous other factors to consider before taking the leap into the buy-to-let sector, not just the cost of a mortgage. The margin of profit from rental income may well be tighter than expected, but property is still regarded as a safe long-term investment.

“The tax changes which have impacted the buy-to-let market have resulted in droves of landlords setting up limited companies to manage their portfolios. The number of limited companies set up between January and September this year was 23% higher year-on-year and 70% of new buy-to-let purchases in England and Wales are now made using a limited company, according to Hamptons estate agents. However, landlords could reach breaking point if stamp duty relief is unwound as planned next year and those facing dwindling profits may sell up, leading to a mass exodus. There may then be a flood of sales, during a window of opportunity, to avoid paying a potential rate hike of capital gains tax (CGT).

“Landlords will be on tenterhooks to see how the upcoming Budget will play out and lenders may remain fluid with their fixed rate pricing over the next few weeks, particularly due to volatility surrounding swap rates. Any borrowers concerned about their present situation would be wise to seek independent advice if they need support or indeed to navigate the latest deals if they are due to refinance in the next few months.”