What will UK interest rate cut by the Bank of England mean for landlords?

A cut in interest rates tends to be a positive move for property owners - and landlords are no exception.

Following the Bank of England’s decision to cut interest rates to a historical low of 0.25 per cent, landlords may soon benefit from even lower mortgage rates.

Will interest rate cuts affect buy-to-let mortgages?

The question now is whether lenders will pass on the cut to their customers, including those with buy-to-let mortgages.

Overall, landlords are already enjoying the kind of impressively low interest rates of less than 2.5 per cent in some cases. (The actual rates will depend on a number of factors, such as the size of deposit).

The rates on buy-to-let mortgages have dropped significantly during the past year, from an average of around 3.59 per cent on two-year fixed-rates to an average of 3.29 per cent, financial group Moneyfacts recently suggested.

For five-year fixed-rate deals, the reductions in the past year are equally impressive from around an average of 4.37 per cent to 4 per cent.

Moneyfacts’ Charlotte Nelson said: “Borrowers have already been enjoying some of the lowest rates on record and the 0.25 per cent cut to the Bank of England Bank Rate will provide further impetus to the rate-cutting trend.”

What happens if my buy-to-let mortgage is on my lenders’ standard variable rate?

The cut in interest rates by the Bank of England means those landlords on their lenders’ so-called standard variable rate (the rate that a mortgage slips onto after the initial deal) could see a reduction in their monthly mortgage payments.

Lenders are expected to pass on the reductions and have already begun reducing rates, with more likely to follow in the coming days and weeks.

Some mortgage providers may be tempted to bag the profits instead. But the Bank of England’s governor Mark Carney has made it clear when he announced the cut in interest rates that he doesn’t want this to happen, saying: “The banks have no excuse, with today’s announcement, not to pass on cut in bank rate and they should write to their customers and make that point.”

What happens if my buy-to-let mortgage is a fixed rate deal?

For those on fixed rate deals, the latest interest rate cut may mean they could also be better off by moving onto a cheaper mortgage once any charges for leaving their current deal are taken into account.

What about buying a new buy-to-let property?

One of the downsides of the interest rate cut is that it is aimed at improving confidence in the housing market, and this could in turn lead to higher house prices.

If this were the case, landlords would end up paying more money for properties that they are looking to buy.

What do you make of the interest rate cut? Let us know below.

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