The best buy-to-let mortgage rates to build your property portfolio or cut your monthly costs
04-24-2015
By Marc Shoffman for www.Thisismoney.co.uk
Landlords are benefiting from both increased choice and the some of the best ever buy-to-let mortgage rates on the market, making it even easier to build your property portfolio.
Rates have inched up over the past few months, but the average two-year fixed rate stands at just 3.45 per cent, according to Moneyfacts.
Meanwhile, the average five-year fixed rate stands at 4.25 per cent and there are now 143 five-year fixed rate buy-to-let mortgage deals with an interest rate below five per cent, compared to 105 six months ago and 55 a year ago.
Rates: Buy-to-let mortgages have fallen to record lows
Buy-to-let landlords have done well out of the property sector, seeing returns of almost 1,400 per cent over the past 18 years, according to a recent Wriglesworth / Landbay study
It said that on average, every £1,000 invested in a buy-to-let property in 1996 was worth £14,897 last year, four times as much the equivalent investment in commercial property, which was worth £4,494 at the end of 2014.
But those returns relied on using borrowed money to buy into the housing market when property was cheap. Now property looks much more expensive when compared to wages, raising a deposit is harder and landlords face more regulation.
That means that if you do decide to invest, watching costs is more important than ever. Your biggest is likely to be your mortgage, so landlords can give their portfolio a boost and save money by accessing some of the best mortgages ever seen.
| Two Years Ago | A Year Ago | 6 Months Ago | Today | |
|---|---|---|---|---|
| Number of Two-Year Fixed Rate BTL Deals Below 3% | 5 | 16 | 57 | 83 |
| Number of Five-Year Fixed Rate BTL Deals Below 5% | 37 | 55 | 105 | 143 |
| Average Two-Year Fixed Rate BTL Deals | 4.44% | 3.94% | 3.69% | 3.45% |
| Average Five-Year Fixed Rate BTL Deals | 4.67% | 4.65% | 4.39% | 4.25% |
| Source: Moneyfacts |
While rates are low, the fees are still very high, often at more than £2,000. So it is important to compare the overall cost of the mortgage.
We compare some of the top rates below for big and small deposits.
40 per cent deposit
The best rates tend to be offered to those with bigger deposits.
NatWest offers the lowest fixed rate on the market at 2.25 per cent with a £1,995 fee, but you will need to have 40 per cent to put down. A 25-year £150,000 mortgage on this deal would cost £8,745 over the two years.
For a longer term five-year deal, Abbey for Intermediaries has a rate of 3.29 per cent with a £1,500 fee. A 25-year £150,000 mortgage would cost £26,175.
Both these rates are hard to beat, despite the high fees. It is also important to watch out for extra incentives that may not really save you any money.
For example Virgin Money has a five-year fixed rate at 3.49 per cent with a big £2,094 fee but offers £500 cashback.
However, a £150,000 mortgage on this deal would still cost £28,269 over the five years, more than the Abbey offer.
25 per cent deposit
Abbey For Intermediaries offers a two-year fixed rate at 2.79 per cent with a £1,995 fee for a 25 per cent deposit. A 25-year £150,000 mortgage would cost £10,365 over two years.
You could fix for five years with Metro Bank at 3.79 per cent with a £1,999 fee. A 25-year £150,000 mortgage would work out as £30.424.
But this is an example of where shopping around could save you money.
Post Office Money has a slightly higher rate at 3.89 per cent for five years but with a lower £995 fee. A 25-year £150,000 mortgage comes out cheaper at £30,179 over five years, saving you £245 compared with the Metro Bank deal.