Will UK interest rates continue to rise? That’s the million-dollar question as we proceed towards 2023, and something that scores of mortgage-holders will be keen to find out.

Property investors in pursuit of the best buy-to-let mortgage deals are finding a growing level of competition in the market right now, which will come as a relief after the economic wobble that caused many lenders to pull their products last month.

Of course, once banks and building societies began to put deals back on the table, rates were noticeably higher. This was linked to the Bank of England upping its base rate to a 33-year high of 3%, and with the turbulence of a swift change of hands at the helm of the Conservative party.

‍

Interest rate rally

Now, though, not only are lenders bringing more buy-to-let mortgage options into play, but products are once again becoming competitive, with cheaper rates and fee-free options. For property investors - both existing and new - this should help to ensure most investment plans stay on track.

Getting a clear picture of where the economy is headed in the near-term, as well as how interest rates and therefore mortgage costs will be affected, is no mean feat at the moment, but there are signs of hope on the horizon.

Predictions for how high interest rates could climb have improved, from a worst-case-scenario prediction of a 6% peak in the summer, to a more modest 4-5% forecast now being touted by the Bank of England itself. In most cases, rates are expected to balance out or retract rather than to keep on climbing.

‍

Buy-to-let mortgage requirements

A large number of property investors own their rental homes with a buy-to-let mortgage. Borrowing has been cheap for a number of years, and for many landlords it makes financial sense to buy using a mortgage.

Most mainstream lenders now offer buy-to-let options, and there are also specialists who cater specifically for this side of the market.

The requirements can be more stringent than for a traditional homeowner mortgage. You may already need to own your home, have a good credit history, and be able to put down a minimum of a 25% deposit. You might also need to provide evidence of your income, including any rental returns that you already make. Your rental income is often expected to cover 125% of your mortgage payments.

Often, buy-to-let mortgages are interest-only, so you don’t pay off any of the capital through your monthly payments. The total borrowing can then be repaid in full at the end of the mortgage term.

One of the advantages of investing in property using a buy-to-let mortgage is that it can allow you to spread your investments. Even if an investor has the means to make a cash purchase, they could split their assets between two or even more properties using buy-to-let mortgages, potentially increasing their long-term gains.

A number of lenders also offer options for landlords and investors operating through limited companies. This has become a more popular method of investing in property in recent years for tax reasons, and the number of mortgage deals available has increased to meet the demand.

‍

Top buy-to-let lenders

A number of buy-to-let mortgage lenders have responded to the recent changes in the market by rolling out new offerings to landlords and investors. The ones listed below are just a selection that have made the headlines recently, and investors are advised to conduct thorough research - or use a broker - to find the best deal for them.

Molo Finance: This digital lender has reduced all its fixed-rate buy-to-let mortgages by 0.5%, so a five-year fixed rate now starts at 6.19%. It also offers a limited company option, starting at 6.49%, while reducing its margin on tracker and variable rates by 0.15%. You can secure investor-led, holiday let and new-build specific buy-to-let mortgages through Molo, too.

Skipton Building Society: The lender has been a strong competitor in the buy-to-let space, and has recently launched a fee-free range of buy-to-let mortgages on two-year and five-year rates. It has also reduced its five-year fixed rates by as much as 0.29% with a £995 fee, and shaved 0.28% off its five-year 95% new-build buy-to-let fixed rate. Fees can be higher for buy-to-let mortgages, so this will be a welcome option for many landlords.

Paragon Bank: Another specialist provider, Paragon Bank has expanded and improved its buy-to-let mortgages on offer, particularly for portfolio landlords with four or more properties. It now offers two-year and five-year fixed rate options for those buying or remortgaging houses in multiple occupation (HMOs), multi-unit blocks and single self-contained properties. Its rates start at a competitive 5.89%, with free mortgage valuations.

Castle Trust Bank: For property investors wanting to hedge against future rate hikes and lock in for the long-term, this specialist lender has just relaunched its TermTen buy-to-let mortgage, which secures rates for 10 years. The 10-year fixed rate, starting at 7.15% up to 75% LTV, is available on standard buy-to-lets, HMOs, holiday lets, portfolios and multi-unit freehold blocks. Long-term loans can provide more certainty and financial security for investors.

At The Prestbury Advisory, our team of experts can provide you with advice and knowledge of the UK property market, whether or not you’re buying with a mortgage. If you want to speak to us about your next investment opportunity, give us a call on 01625 725 779, or email us at contact@theprestburyadvisory.com