Telephone iconCall UsTelephone icon0333 0146 683
Our opening hours
Chevron left icon
Knowledge centre

Interest rate cut means mortgage costs have fallen for landlords

2-minute read

Mollie Millman

20 May 2020

Facebook iconTwitter iconLinkedIn icon

Landlords are seeing the costs of finance decline after the Bank of England cut interest rates at the beginning of the coronavirus outbreak, in a bid to support the economy.

Lenders have begun to pass on the drop in interest rates to borrowers in the form of lower rates on mortgages.

These include cuts in the rates available to landlords, on both shorter and longer-term deals.

A decline in mortgage rates over the past year

Financial group Moneyfacts reports that the average rates on both two-year and five-year mortgage deals have declined year on year.

Two-year fixed rate deals

It said that the average two-year fixed rate mortgage for landlords has dropped from 3.02 per cent at the beginning of May last year to 2.51 per cent 12 months later.

It means the average monthly payment has dropped from £377 to £314 during the same period. It equates to a potential saving of £63 a month, or £756 a year.

This is based on an interest-only mortgage of £150,000 taken across a 25-year term.

Five-year fixed rate deals

Some landlords prefer to take a five-year fixed rate deal, as it means they can avoid some of the strict lending criteria applied to shorter-term mortgages.

Moneyfacts said that the average five-year fixed rate buy-to-let mortgage has seen rates drop from 3.53 per cent to 2.94 per cent 12 months later.

It’s seen average monthly payments drop from £442 to £368 during this time. It equates to a potential saving of £74 a month, or £888 a year.

But the number of mortgage deals have declined

While average mortgage rates have dropped for landlords, the number of deals they can access has also declined.

The total number sat at 2,235 in May 2019, compared to only 1,455 at the beginning of May 2020.

Some lenders withdrew their products altogether at the beginning of the coronavirus outbreak, with the likes of the Mortgage Works and HSBC withdrawing their tracker mortgages.

At the start of the outbreak there were fears that some lenders would increase the cost of borrowing, due to an increased risk of tenants defaulting on rents and falling property prices.

However, this has largely failed to materialise amid measures taken by the government, such as a ban on evictions, which the government achieved by banning starting court proceedings.

It extended the notice period on Section 21 notices from two months to three months, meaning no tenant can be forcibly evicted during this period.

Sign up for our newsletter

Looking for the latest news and features to help you stay ahead? Sign up for our monthly newsletter and get the inside track on the issues that matter to you.

Sign up now

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

Find this article useful? Spread the word.

Facebook icon
Share
Twitter icon
Tweet
LinkedIn icon
Post

People also liked

12 March 20202-minute read

What the UK Budget 2020 means for landlords

Chancellor Rishi Sunak announced the first UK Budget since October 2018 amid continuing political and economic uncertainty. Here’s the key…

Read more

Keep up to date with Simply Business. Subscribe to our monthly newsletter and follow us on social media.

Subscribe to our newsletter

Categories

Popular articlesBusiness resources from FarillioGeneral businessGuestInsuranceLandlordLandlord resources from FarillioLegal and financeMarketingNewsOpinionProperty maintenanceTradesmanCovid-19 business support hub

Address

6th Floor99 Gresham StreetLondonEC2V 7NG

Sol House29 St Katherine's StreetNorthamptonNN1 2QZ

© Copyright 2020 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.