Across the mortgage market, lenders have been competing to offer cheaper products, with buy-to-let mortgage rates continuing to fall.
Average buy-to-let mortgage rates are now lower than their average equivalent in the residential mortgage market, as more lenders join the race to improve their product offerings – despite the fact that a rate cut next month remains uncertain.
Nationwide made the headlines yesterday after slashing its five-year fixed rate mortgage on 60% loan to value (LTV) to just 3.99% plus a fee. It is thought this move could provoke an even fiercer “rate war” among lenders ahead of the Bank of England’s next base rate decision in August.
Loans for those with smaller deposits are also getting cheaper, which is more likely to have a positive on the wider market in terms of affordability.
At the same time, buy-to-let mortgage rates have been quietly falling too – in fact as of July 16, the latest data from Moneyfacts showed that the average rate for landlords was 5.45% for a two-year fixed term, and 5.51% for a five-year fixed term, which is actually slightly below the average homeowner mortgage in the same bracket.
Even cheaper buy-to-let mortgage rates
For many landlords, more affordable buy-to-let mortgage rates will be welcome news. Rates hit a 14-year high as a result of the Bank of England upping its base rate to 5.25%, and while many lenders have offered cheaper products as this year has progressed, borrowing remains much more expensive than it was.
Much of the Bank of England’s next interest rate decision seems to be pegged on inflation, but analysts are predicting that the Monetary Policy Committee could once again opt to hold the rate until the economic outlook becomes more certain.
Despite this, lenders are keen to stimulate the market and attract borrowers, with multiple institutions announcing lower rates over the past couple of weeks.
For example, The Mortgage Works is now offering buy-to-let mortgage rates starting from as little as 3.54%, having lowered select rates by up to 0.25 percentage points.
Major international bank HSBC also slashed its buy-to-let rates earlier this week, along with Virgin Money, while last week NatWest, Co-op Bank and Accord Mortgages joined the mix to offer more competitive rates.
When could the next interest rate cut be?
The Monetary Policy Committee (MPC) of the Bank of England is due to meet on August 1 to make a decision on the base rate, where members will vote to either increase it, reduce it or keep it the same.
While lenders are not solely influenced by this decision, it certainly plays a part, so it is interesting to see so many lenders bring their rates down ahead of the announcement. Still, a growing number of experts are signalling that a rate cut in September is a more likely outcome.
“Mortgage rates could fall further, but it is difficult to tell how quickly and by what margins,” said Rachel Springall, from Moneyfacts.
She added: “Those waiting for the Bank of England to cut base rate may be crossing their fingers for August, but this has split opinions among economists who are now pointing towards September at the earliest due to stubborn service inflation.”
Ashley Webb, an economist at Capital Economics said: “While the easing in wage growth in May was broadly in line with what the consensus and the Bank of England expected, it probably doesn’t offset the overshoot in services inflation in recent months.
“As a result, we have changed our forecast for the timing of the first interest rate cut from 5.25 per cent from August to September, although it is a close call.”
Ahead of another rate cut, it seems likely that lenders will continue to compete when it comes to buy-to-let mortgage rates and offers for landlords, so those looking to remortgage or take out new borrowing soon are being urged to keep an eye on the market.
