Buy-to-let (BTL) mortgage rates have risen substantially in 2024, with average interest rates ranging between 5% and 7% depending on the lender and mortgage type. Interest rates are now much higher compared to previous years, driven by inflationary pressures and higher base rates from the Bank of England.
Most lenders require a minimum 20% deposit for a buy-to-let mortgage, though better rates are available with higher deposits. For instance, borrowers with a 40% deposit can access more competitive rates
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Lenders assess rental income to ensure it covers mortgage payments, typically requiring that rental income is 125% to 145% of the mortgage payment. Higher-rate taxpayers may face stricter criteria, with some lenders requiring rental income to cover 145%
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Buy-to-let investors should consider tax changes. The reduction in mortgage interest tax relief means landlords can no longer deduct the full interest amount from their taxable income. This has led some landlords to explore setting up limited companies, which can still claim mortgage interest as a business expense
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These mortgages offer predictable payments, shielding landlords from rate hikes. Typical fixed-rate deals in 2024 are around 5.5% for two years and 6% for five years
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Variable rates start around 5%, but payments can rise if the Bank of England increases rates. These mortgages are best suited for landlords who can absorb potential increases in monthly repayments
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With interest-only mortgages, landlords only pay the interest each month, making it easier to manage cash flow. However, the loan principal remains due at the end of the term. Interest-only deals in 2024 range from 5.5% to 6.5%
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Given the current volatility in the market, it’s important for landlords to shop around or use a mortgage broker to find the best deal. Platforms like Moneyfacts, Compare the Market, and specialist brokers offer comparison tools to ensure you’re getting the most competitive rate for your needs
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The best buy-to-let mortgage rates in 2024 require careful consideration of your financial situation, rental yield, and the type of mortgage that suits your investment strategy. With rising costs, many landlords are seeking fixed-rate mortgages for stability, but others may prefer the flexibility of variable rates. Fraser Bond is well-positioned to guide property investors through these challenges, ensuring they secure the best mortgage deal to maximise their rental profits.
