The average mortgage rate for landlords is on the increase, it has been revealed.
A two-year tracker deal typically costs 2.93 per cent, according to financial group Moneyfacts.
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Mortgage rate increases 0.2% in one month
It is an increase of 0.2 per cent in just one month, the equivalent of an extra £26 every month on a £150,000 interest-only mortgage.
It follows a decision by the Bank of England last month to increase interest rates by 0.25 per cent to 0.5 per cent.
It was the first time that the Bank had raised interest rates since 2007 - before the credit crisis struck.
Bank Rate increase impacts buy-to-let mortgages
Charlotte Nelson, a finance expert at Moneyfacts, said: “Just one month after the Bank of England’s rate rise announcement, it’s clear to see from the latest statistics that the average two-year tracker buy-to-let mortgage has factored in the Bank Rate increase.”
It is a sharp turnaround from the record low tracker rates for landlords - of 2.23 per cent in November - with the largest monthly rise that has ever been seen on Moneyfacts’ records.
Ms Nelson continued: “Variable rates are designed to track the Bank Rate, so an increase to the two-year tracker rate is little surprise.
“However, not only has the average variable tracker rate increased, so too has the average two-year fixed rate, seeing rates bound upwards and nearing June 2017 levels with the highest monthly rise since April 2015.”
The average two-year fixed rate deal for landlords has risen to 2.93 per cent, up from 2.89 a month earlier.
‘Lethal cocktail’ for buy-to-let mortgages?
Moneyfacts attributed the rises to a combination of factors, including a change in the lending criteria applied to those with several buy-to-properties, along with the Bank of England’s interest rate rise.
It described these factors as a ‘lethal cocktail’ for buy-to-let mortgages, with all of that pressure leaving banks and building societies little choice but to review their product range.
Ms Nelson explained: “The criteria changes for portfolio landlords and the rising fixed and variable tracker rates will start to eat into the returns of landlords. With rates on the rise, it is important that landlords weigh up their options carefully.
And she added: “Given that savings rates remain low, property is still seen as a good option by many and the lure of a higher return will continue to see many potential landlords wanting to dip their toe into the buy-to-let waters.
“As rates keep rising on buy-to-let deals, borrowers will need to act fast if they still want to get a low rate. Anyone who is unsure should seek the advice of a financial adviser.”