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A silver lining for landlords? Interest rates at an all-time low as buy-to-let purchases fall

2-minute read

Lauren Hellicar

26 October 2018

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Following Bank of England base rate increases, landlords are managing to escape a rise in mortgage interest thanks to the buy-to-let market slowdown.

Here, we take a look back at the buy-to-let market over the past three years, including the difficulties presented by tax and regulatory changes – and why, despite this, there's a silver lining for landlords.

Buy-to-let property purchases are dropping

In the first half of 2018, buy-to-let property purchases were down 13 per cent compared to the first half of last year, according to research by Hamptons International.

More staggeringly, the research shows there’s been a 31 per cent drop in landlords buying homes in the past three years.

The drop has been seen across all regions of Britain, with the most significant decrease in the South East (45 per cent), and Scotland not far behind at 44 per cent. While the drop in purchases was only 16 per cent in the North East of England, this still accounts for thousands of properties, according to Hamptons.

Tax and regulatory changes prompting the drop

With figures reported in the Daily Mail revealing that landlords are selling their buy-to-let properties at a rate of nearly 4,000 a month, there are obvious reasons why.

  • full tax relief on mortgage interest is no longer available to landlords
  • landlords now get a maximum of 20 per cent tax credit
  • since April 2017 the wear and tear allowance has been replaced with like-for-like replacement of furnishings
  • new House in Multiple Occupation (HMO) regulations mean more properties fall under that classification
  • landlords now pay tax on their total income rather than their profit once the mortgage is paid
  • since 2016 there’s been a three per cent surcharge on stamp duty for new purchases

Read more about the 2022 buy-to-let tax changes in our article.

We’re also yet to find out whether a proposed lettings fees ban currently going through parliament will come into effect. This could lead to costs being passed on to landlords.

But there's a positive impact on buy-to-let mortgage rates

This slowing of the buy-to-let market has encouraged mortgage lenders to lower their interest rates to try to attract landlords.

According to, the average buy-to-let mortgage rate has fallen to its lowest level ever recorded, with the average rate for a five-year fixed term mortgage just 3.4 per cent, down from 3.77 per cent in October 2016.

Why it could pay to stick with the sector

Some landlords are choosing to leave the market after facing increased costs due to tax and regulatory changes.

But it seems there’s at least some light at the end of the tunnel for landlords, with mortgage lenders being forced to offer more favourable interest rates.

Which? suggests that with rates already creeping up and more rumoured rises, a five-year fixed buy-to-let mortgage could be a good option for landlords. Bear in mind, however, that early repayment charges may apply if you need to sell up for some reason within that five-year period.

It’s worth seeking professional advice from a reputable mortgage broker to make sure you’re getting the right deal for your situation.

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We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer

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