Although mortgage interest rates are still at their highest for more than a decade, they have come down since last autumn and are now actually in line with longer term averages.
This has been as a result of:
- The rate of inflation (CPI) having fallen from its peak of 11.1% in October 2022, to 3.2% in March this year (ONS)
- Market forecasters predicting that, although the Bank of England base rate is still at a 15-year high of 5.25%, this will start to come down in the next few months. Capital Economics expects it to be 4% by the end of next year.
These two factors, combined with increasing economic stability in the UK in terms of employment and positive real wage growth, have given lenders the confidence to offer better rates to borrowers. And, as activity in the property market starts to increase, competition for business should lead to mortgages becoming a little cheaper over the next 12 months.
CBRE expects the average rate for a 75% 5-year fixed product to drop by around 1% over the 12 months to Q4 2024, and for rates to continue falling over the coming 5 years. That’s obviously excellent news for borrowers and should help stimulate the housing market, which has seen a lull in transactions recently.
How are buy-to-let rates looking at the moment?
Here are some of the best rates currently available, according to Moneyfacts:
- At 80% LTV: a 2-year fixed at 4.65%
- At 75% LTV: a variable rate of 5.19%, or a 3-year fixed at 3.89%
- At 65% LTV: a 2-year fixed at 3.79% or a 5-year fixed at 4.14%
Might now be a good time to buy a buy-to-let?
Given that a lot of landlords (and other buyers) might be waiting for rates to drop further before making a new investment, now could be a great time to bag a bargain while there isn’t too much competition for properties.
Although your mortgage costs are likely to be higher than they might be in 12-24 months’ time, if you can negotiate a discount on the purchase price with a motivated seller, that ‘instant equity’ in the property could more than compensate you for a slightly more expensive mortgage product – and you can remortgage onto a better rate in a couple of years’ time.
If you’d like to check out how much your repayments could be with current interest rates, you can use our handy online mortgage calculator. And we also have calculators to help you see:
- What rental income you’re likely to need based on your borrowing
- How much you might be able to borrow based on the rental income a property can generate
- How much stamp duty you’ll have to pay for a new purchase.
MAB 17929
