It’s almost two years since a flood of prospective landlords snapped up rental properties before the buy-to-let stamp duty hike came into force – and for many, their initial rate is about to expire.
In November 2015, then-Chancellor George Osborne announced plans to charge an extra 3% on each tier of stamp duty for buy-to-let properties and second homes costing more than £40,000.
This led to a flood of investors rushing to complete on buy-to-let property purchases before the changes came into force the following April. If you were one of those investors and your two-year introductory rate is coming to an end, we’ve scoured the market to bring you the best buy-to-let mortgages currently available.
Buy-to-let mortgages: best two-year fixed rates
The following deals are based on a £165,000 property, borrowing £125,000 over 25 years.
Buy-to-let mortgages: best five-year fixed rates
According to Moneyfacts, the average interest rate for a five-year fixed-rate buy-to-let mortgage is currently 3.43%.
A rate this low has only ever been recorded once before, in October 2017, so taking out a five-year deal now could be a savvy move – especially with a potential base rate rise on the horizon.
The deals below are based on the same scenario as the two-year deals listed above (a £165,000 property, borrowing £125,000 over 25 years).
Is now a good time to take out a fixed-rate mortgage?
In February, we reported that mortgage interest rates may start to increase due to the end of the Term Funding Scheme (TFS).
Many market analysts are predicting a base rate rise in May, which is also likely to have a knock-on effect on mortgage rates.
This means that now could be a good time to take out a fixed-rate mortgage and lock in a low rate before interest charges creep up.
What to bear in mind when remortgaging
With any mortgage, it’s worth regularly checking whether you’re on the best deal for your circumstances. This is particularly true if you’re on a fixed-rate deal and the introductory interest rate is coming to an end.
For most deals, you’ll revert to the lenders’ standard variable rate – meaning the amount you’re paying will usually jump significantly. However, you should always weigh up the total cost of remortgaging before signing on the dotted line.
Most mortgages carry early repayment charges – often over £1,000 – which you’ll have to pay if you exit the deal before the full mortgage term. Many mortgages also carry fees that you pay when applying. The total cost of these charges may mean that a small drop in interest rate isn’t worth switching for.
All change in the buy-to-let sector
A number of things are changing for landlords this year. From April, newly bought rental properties will need to have an energy efficiency rating of E or above.
By 2020 this rule will have been extended to cover all existing rental properties. April will also see the amount of tax relief that landlords can claim on their mortgage interest drop from 75% to 50%.
It’s likely that lettings fees will be banned this year, and landlords will soon have to register with an ombudsman scheme.
Source: Which