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Five-year fixed rates drop to record low

The average rate on a five-year fixed rate buy-to-let mortgage has fallen to an all-time low of 3.4%, the latest figures from Moneyfacts show.

Rates on five-year fixed mortgage products have fallen from an average of 3.77% in October last year, which is good news for buy-to-let landlords thinking about buying property or remortgaging.

But Moneyfacts finance expert Charlotte Nelson is rather surprised that long-term fixed rates have dropped given that the BTL market has been on what she described as a “rollercoaster ride” in recent years, with two base rate rises as well as multiple regulation and tax changes to contend with.

The reality is that the recent collapse in buy-to-let lending has encouraged lenders to make their deals more attractive in an attempt to try and entice borrowers back into the market.

“In the aftermath of August's base rate rise, many BTL borrowers will be looking to remortgage from their standard variable rates (SVRs), with several of these landlords potentially considering longer-term options to act as a buffer against any future rises,” she said. “It is this extra business providers are likely wanting to attract.”

However, with some experts predicting that the Bank of England could raise interest rates sooner, rather than later, Nelson notes that the existing record low BTL mortgage rates may not last and that is why landlords should consider taking advantage of the current interest rate environment now.

Additionally, Nelson pointed out that “savvy borrowers are aware that the strict stress test applied to two-year deals is not applied to five-year fixed rates”.  

She added: “While it is great news for landlords that the long-term deals are cheaper, borrowers know all too well that with the potential for further base rate rises in the future, these low rates are unlikely to last.

“Therefore, any borrower sitting on their SVR or coming to the end of their term would be wise to consider a new deal now before it's too late.”

Poll: Have you taken out a five-year fixed rate buy-to-let mortgage on any of your properties?

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