Landlords are being warned that the next Bank of England base rate rise, possibly at its next meeting in early February, could trigger mortgage rate increases.

Despite the Bank of England’s surprise increase in the base rate last December from 0.1 to 0.25 per cent, the average cost of buy to let fixed rate mortgages favoured by landlords has so far remained roughly steady. 

But now the buy too let broker Property Master is warning landlords that this is unlikely to continue if, as expected, the base rate goes up again when the Bank meets on February 3.

Property Master’s BTL Mortgage Tracker has found that the average rate for a buy to let mortgage for a typical loan was as low as 1.69 per cent which, once fees are included, translates into a monthly cost of £262.  

This was for a two-year fixed rate loan of £160,000 representing 60 per cent of the value of the property.  

As expected, buy to let mortgages with a Standard Variable Rate were shown to be the most expensive – typically 4.77 per cent.

This means landlords currently sticking with a Standard Variable Rate are paying around £596 per month, up to £334 a month more than if they switched to the average cheapest fixed rate mortgage.  

Lenders will typically increase their Standard Variable Rate quickly in response to any rate rise from the Bank of England, warns Property Master.

Chief executive Angus Stewart says: “The buy to let mortgage market is a dynamic one and yet again we have seen how this competition has helped to some extent cushion landlords from the increased costs you would expect to see from a rise in bank base rate, at least for landlords on fixed rates.  

“The question is for how much longer given that the expectation is growing the Bank will move again in the first week of February.  This could very well be a small window for landlords to bag a good rate before the market moves more decisively into a rising interest rate environment.”  

He continues: “What we can say with certainty is the availability of low buy-to-let mortgage rates has to a large extent obscured the pressures on landlords operating in the private rented sector.  

“The increasing cost of regulation, higher taxes and the removal of various tax benefits has been able to happen to very little affect whilst finance costs remained low.  

“If this changes it will hit landlords hard, and we may well see at least the smaller ones deciding buy to let is no longer a sensible investment for them.”