Buy-to-let mortgage rates: is it just a correction?


Landlords are being urged not to panic as buy-to-let mortgage rates inch upwards, and to learn lessons from history.

Most sectors are not immune to the doom and gloom messages out there right now in terms of inflation and the economy; but the UK property market remains one area that has proven remarkably resilient through it all.

The Bank of England has raised the base rate from its all-time low of 0.1%, and since then has cranked it up further to 1.25%. Most forecasters predict further rises over the coming year as the country grapples with inflation.

Ultimately, these increases have been affecting mortgage rates, and this is something landlords are taking heed of. The average buy-to-let mortgage rate is now around 4.01% for a two-year fixed rate.

But what should landlords operating in the UK be doing about rising rates?

Don’t panic

Dan Lee at Total Landlord Mortgages has noted that some landlords looking at the buy-to-let mortgage market right now are getting ‘cold feet’ about taking in borrowing.

“Obviously there’s a lot of doom and gloom out there right now and everyone is stressing about rising interest rates,” says Lee.

“But my two decades or more of experience in the mortgage industry teaches me that rates are not high – they are just returning to a realistic level.”

Rates have been exceptionally low in recent years, triggered by the 2008 financial crisis. Before that point, the Bank of England base rate had hovered at between 3.5% and 7.5%, which puts today’s rates into context.

Those taking on buy-to-let mortgage products during these years have benefited from this, even while section 24 tax changes had an impact on some landlords.

“I cannot see the Bank of England allowing mortgage interest rates to reach 8% or 9% that they hit during the late 1980s and early 1990s, because we’re all so much more in debt than we used to be,” says Lee.

Long-term plan for buy-to-let mortgage holders

Property investment for many, particularly those operating in the rental market, is a long-term game. Therefore, using historical data as a guide, there should be an expectation that rates will fluctuate over time.

Lee also brushes off talk of a property crash, pointing out that it is instead a correction following the “unnatural growth” we have seen in the property market, ked by cheap mortgages, massive demand and limited stock.

He adds: “While the government would not step in if there was a stock market crash, they would if there was a property crash, as we saw at the outset of Covid with the lowering of interest rates and the stamp duty holiday.”

He believes buy-to-let mortgage applicants should prepare for rates of around 4% or 5% in the near future.

“One has to remember when investing in property: this is generally a long-term investment, not short-term, and therefore rates are bound to fluctuate over the term of a mortgage.”

Tax relief for landlords

From April 2017, the mortgage interest tax relief landlords could claim was reduced by 25% each year until it reached zero in April 2020. At this point, mortgage relief was replaced with a 20% tax credit instead. 

The 2021-22 tax year is the second full financial year where landlords can only use this credit.

So while things have changed for buy-to-let mortgage holders as a result of this, there are other tax reliefs that can be claimed, and recent research showed this side of things had increased.

Ludlowthompson found that, despite a reduction in the amount of relief landlords could claim on buy-to-let mortgage interest, the total amount of tax relief claimed by landlords rose from £18.1bn in 2020 to £18.5bn in 2021.

Loan interest still made up the most significant portion of tax relief claimed by landlords at £6.9bn, which amounts to 37% of all reliefs claimed by landlords. Property repairs, maintenance and renewal made up 24% of the overall figure at £4.5bn.

Buy-to-let tax relief can also be claimed on a number of other costs, including professional fees, such as for letting agents and accountants, and insurance.

CityGreens, Solihull, Birmingham

City-style apartments directly on Birmingham's largest park

  • Limited pre-launch prices.
  • ZERO ground rent
  • Excellent tenant demand

£182,000 - £419,000

Highgrove Mews

High Net Yield Freehold Houses

  • Commutable to London (27 mins to central Paddington station)
  • Rental demand extremely strong with large industry presence in Reading
  • Freehold with 4% net yield

£284,955 - £457,000

St Petersgate – Stockport Manchester

New Launch - Stockport Manchester, apartments from £160,000

  • Discounted launch prices from £160,000
  • Excellent transport links with 3 trains per hour to London Euston and only 9 mins journey to Manchester Piccadilly
  • Experienced development team

Assured Rent Housing Association Leases

Assured Rent Housing Association Leases

  • Assured rent & no rental voids
  • Tenant damage cover & newly refurbished inline with requirements of a corporate sitting tenant
  • Free property and lettings management

From £62,000

Emerging Birmingham Commuter Town With Properties From Just £104,000

The emerging Birmingham commuter town where properties are selling in an average of just 24 days

  • A collection of 62 two bedroom apartments and 28 one bedroom apartments.
  • DE14 is one of the fastest selling postcodes in the West Midlands.
  • 23 minute train journey into Birmingham New Street Station.

Properties from £104,000

Mill, Stockport

The Northwest's emerging property hotspot

  • Discounted off-plan 2-bed prices from £162,000
  • Completion date - Q4 2021
  • Rental yields - 6% plus

Discounted off-plan 2-bed prices from £162,000


Talk to us

Speak to our UK property experts today: 

+44 (0) 333 123 0320

Open from 9am-6pm GMT

+852 9865 4446

Open from 9am-6pm HKT

Stamp Duty Calculator


Unlock members only investment opportunities and full development details. Join now – it’s free, quick and easy.


Not a member? Sign up for free

buy-to-let mortgage

Buy-to-let mortgage rates: is it just a correction?


By submitting your details via this online form you agree to be contacted via email/phone/SMS by Direct Marketplace Ltd t/a BuyAssociation in relation to property investment and property developments . We do not share your personal details with third parties.  To view our full Privacy Policy click here.