This year has been a trying one for the buy to let mortgage market, with not only several regulation changes to tackle but a base rate rise on top.
It's the latter that has impacted on rates, with the latest research from moneyfacts.co.uk showing that the average two-year tracker BTL mortgage rate has risen by 0.2% since the 2 November announcement, the highest monthly rise on record.
It may have been inevitable, but it’s no less a blow for borrowers, many of whom have only ever known a time of falling mortgage rates. The average two-year tracker rate now stands at 2.43%, above last year's figure of 2.40% and notably higher that November's record low of 2.23%.
The average fixed-rate buy to let mortgage deal has also risen in the last month, albeit to not quite the same extent – the average now stands at 2.93%, a rise of just 0.04% from November and still comfortably below December 2016's figure of 3.01%. However, there is now only one way for rates to go – and that is up.
"Just one month after the Bank of England's rate rise announcement, it's clear to see from the latest statistics that many providers have already factored in the increase,” said Charlotte Nelson, finance expert at moneyfacts.co.uk. "Rates have turned around from the record low of 2.23% in November with the largest monthly rise ever seen on moneyfacts’ records.
"Variable rates are designed to track base rate, so an increase in the two-year tracker rate is little surprise. But 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."
Charlotte explained that the criteria changes for portfolio landlords, together with rising SWAP rates in the run-up to the base rate announcement and then the base rate rise itself, "have proved a lethal cocktail for fixed rate BTL mortgages, with all this pressure leaving providers little choice but to review their range".
These changes could already be starting to eat into landlords’ returns, and rising fixed and variable buy-to-let mortgage rates will only heighten the issue, "making many consider whether BTL is still the right option for them," said Charlotte.
"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. However, as rates keep rising on BTL deals, borrowers will need to act fast to get a low rate.”