Buy-to-let mortgage rates have been a focal point for landlords and property investors over the past year, with notable fluctuations influenced by economic events, swap rate markets, and broader financial pressures. Recent analysis by specialist lender Octane Capital suggests that buy-to-let mortgage rates could rise again in 2025, particularly if the Bank of England holds off on cutting interest rates in the coming weeks.
A Look at Recent Trends in Buy-to-Let Mortgage Rates
For decades owning and renting out property has been a great investment and source of income for landlords. However, recent changes in inflation and the base rate have meant that owning rental properties (especially those that are mortgaged) is becoming more and more difficult to turn a profit on. Octane Capital’s data shows that buy-to-let mortgage rates saw a general decline throughout 2024, providing some relief to landlords after the sharp increases in 2023. The average rate for a two-year fixed-rate buy-to-let mortgage (75% loan-to-value) dropped from 4.83% in March 2024 to 4.22% in October, reflecting an encouraging trend for investors.
However, following the Autumn Budget in late October, rates began to tick upwards. By November 2024, the average rate had increased to 4.28%, only to dip slightly to 4.26% in December. Despite this minor fluctuation, the December 2024 rate of 4.26% was still significantly lower than the December 2023 average of 5.40%.
Across the full year, the average buy-to-let mortgage rate in 2024 stood at 4.53%, a considerable improvement compared to the 5.47% average seen in 2023. This downward trend was largely driven by falling swap rates, with the average one-year swap rate in 2024 sitting at 4.81%, down from 5.25% in 2023. Similarly, the five-year swap rate averaged 4.16%, compared to 4.52% in the prior year.
Why Buy-to-Let Mortgage Rates May Rise in Early 2025
Although 2024 was characterised by decreasing buy-to-let mortgage rates, the market outlook for early 2025 suggests an increase unfortunately. This expectation is linked to soaring gilt yields, which have a direct impact on swap rates and, in turn, mortgage pricing.
The Bank of England’s next interest rate decision, set to be announced on the 6th of February, will play a crucial role in determining whether gilt yields – and subsequently mortgage rates stabilise or climb further. While many experts believe the Bank of England may cut rates again in the near future, the timing remains uncertain. If we have learned anything from the Bank of England base rate over the last couple of years, it is that the bank will always take caution over anything else, and they won’t hesitate to hold the base rate if they feel it needs it. Should the Bank delay its decision to reduce the base rate, it is likely that buy-to-let mortgage rates will continue their upward trajectory in the early months of the year.
The UK Buy-to-Let Market: Opportunities and Challenges
The buy-to-let market has faced numerous challenges in recent years, from increased regulatory requirements and tax reforms to fluctuating mortgage rates. Yet, for many landlords and property investors, the sector remains an attractive option for generating long-term income and building wealth. Rising rents across much of the UK have bolstered the financial appeal of buy-to-let investments, even in the face of higher costs.
However, as mortgage rates rise, landlords may need to reassess their strategies, particularly those operating with high levels of leverage. For those looking to expand their portfolios or remortgage existing properties, understanding the current mortgage market and securing competitive rates is more important than ever. That’s why a specialist buy-to-let mortgage advisor is worth their weight in gold to a landlord.
Need a Buy-to-Let Mortgage or Remortgage?
Whether you’re looking to purchase a new investment property or remortgage an existing one, Oportfolio Mortgages is here to guide you every step of the way. Our team of experienced advisors can help you find the most competitive buy-to-let mortgage rates tailored to your unique circumstances. We understand the challenges landlords face and are committed to helping you achieve your property investment goals. Contact Oportfolio today to discuss your options and secure the right deal for your buy-to-let needs.
