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Which fixed-rate mortgages are best for landlords?

3-minute read

Mollie Millman

12 February 2019

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The mortgage landscape for landlords is changing, with plenty of new offers that include the launch of a new one-year fixed-rate deal.

Santander has launched the new product for property investors seeking to remortgage. It comes with no product fees and a rate of 2.25 per cent for those with a deposit of at least 25 per cent.

It is the only one-year product in the market and could be useful for those seeking to sell up next year following the extra tax burdens placed on landlords and the current political uncertainty.

One-year fixed-rate deal

By opting for a one-year fixed-rate deal, investors can avoid locking themselves into a longer-term deal and any expensive early redemption charges that may apply.

However, it also means they are not guarding themselves any potential rises in interest rates beyond one year.

Chris Sykes, of mortgage brokers Private Finance, explained: “It provides investors with a degree of flexibility to which they would not previously had access. This is an example of a lender innovating in response to the constantly-fluctuating demands of the geopolitical climate.”

Almost all landlords ask for a fixed-rate mortgage

It comes as research shows that the majority of landlords - at a massive 97 per cent - pick a fixed-rate mortgage.

Indeed, 84 per cent of landlords opted for a five-year fixed-rate mortgage in the final three months of last year, up from 70 per cent in the preceding three months.

Five-year fixed-rate deals are popular among landlords as they have less stringent affordability criteria, and can also help guard against future interest rate rises.

Arrangement fees

The research by Mortgages for Business also found the average fee that landlords are charged for their mortgage is on the rise.

It has increased from £1,423 a year ago to its current level of £1,506, the first time that the figure has gone above £1,500 since the beginning of 2016.

At that time, the average flat fee rate stood at £1,556, when there was a rush of buy-to-let applications as landlords raced to complete transactions ahead of the introduction of a 3 per cent stamp duty surcharge on buy-to-let purchases.

It is important to take into account these charges when looking at headline mortgages rates as landlords may be better off taking a higher initial rate with a lower arrangement fee.

Best fixed-rate mortgage deals for landlords

The best mortgage deals currently available for landlords include a two-year fixed-rate deal from Virgin Money, which has a rate of 1.98 per cent, according to financial firm Moneyfacts.

The product has an arrangement fee of £995 and is for those with a deposit of at least 25 per cent.

Alternatively, the Post Office is offering a two-year fixed-rate deal with a rate of 1.93 per cent.

One of the best three-year fixed-rate mortgages for landlords has a rate of 2.03 per cent and is being offered by the Virgin Money for those with a 40 per cent deposit.

One of the best five-year fixed-rate deal for landlords is also from Virgin Money. It has a mortgage rate of 2.09 per cent, but comes with a large arrangement fee of £1,995, and only those with a 40 per cent deposit are able to apply.

Alternatively, landlords with a smaller deposit of 20 per cent should head to Yorkshire Bank, where there is a five-year fixed-rate deal available with a rate of 4.99 per cent and an arrangement fee of £999.

Of course, the deal that works best for you will depend on your circumstances, so make sure to do extensive research and consider speaking to a mortgage advisor.

Are you looking to get a mortgage for your rental property? Tell us about it in the comments.

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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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