The information contained in this article was correct at the time of writing
December 20, 2023
The Buy to Let Mortgage Market in the United Kingdom
The buy to let mortgage market has grown substantially over the past two decades in the United Kingdom. As of 2022, there were estimated to be 5.5 million private rented properties, representing 19% of all properties across England. With high demand from tenants, combined with attractive gross rental yields averaging between 2-8% depending on location, buying property to rent out remains a popular investment choice for landlords across the country.
For buy to let lending in 2022, the total value of new mortgages exceeded £43 billion, the highest level since 2007 according to UK Finance. Despite economic headwinds, tenant demand continues to support investor appetite in the private rented sector. The average buy to let mortgage loan stood at £305,000, an increase of 6% from the prior year.
With a range of mortgage products tailored for landlords now available, there are flexible financing options to acquire single or multiple investment properties. Whether you are starting or expanding an existing rental property portfolio, our mortgage specialists can help you secure the ideal buy to let loan for your needs. Contact us today to discuss the competitive residential and remortgage deals we can access
Buy to Let Mortgage Criteria and Factors
When applying for a buy to let mortgage in the UK, there are several key criteria lenders will assess to determine loan eligibility and rates:
- Rental Income – Lenders will review expected monthly rental income to ensure it covers at least 125-145% of your mortgage payments. The higher the rental cover, the more favourably your application will be assessed. Provide detailed projections.
- Deposit Levels – Most lenders require a minimum 20-25% deposit. The higher the loan-to-value (LTV), the higher the interest rates charged generally. Maximising your deposit can reduce rates.
- Credit History – Your personal credit file will be checked for defaults, missed payments, bankruptcies and other adverse indicators that may impact the lending decision. Maintaining a sound credit rating is advised.
- Existing Portfolio – If you have prior investment properties, expect more scrutiny from lenders on your track record of managing buy to let mortgages and rental cash flows. Evidence of consistent rental demand and income is essential.
In addition, your personal income, employment status and outstanding debts will be reviewed to analyse overall affordability. Having an expert broker on your side ensures your application ticks all the necessary boxes to secure approval. Get in touch today to review the specific buy to let loans we can source for your investment purchase.
Interest Rates and Buy to Let Mortgages
Interest rates are a primary consideration for landlords seeking buy to let mortgages in today’s rising cost environment. Fortunately, as seasoned mortgage advisers we have access to exclusive residential and remortgage products with ultra competitive pricing.
Across the market in 2022, average buy to let fixed mortgage rates stand at 4.33% for all LTV levels – a significant increase from the historic lows under 2% offered during the pandemic. Expect further volatility in 2023 as the Bank of England manages inflationary pressures. Variable rate mortgages currently average 4.76%.
With over a thousand buy to let and remortgage options at our fingertips, we leverage our panel of lenders to secure reduced interest rates for creditworthy borrowers. Whether opting for 2, 3, 5 or 10 year fixed terms, or variable loans, we identify the most attractive packages tailored to your rental portfolio.
Certain lenders also factor in the property type and location. For instance, rates on flats and new build homes sometimes come with small premiums. Properties in London or other hot spots may have pricing incentives as well.
Connect with our advisors to discuss current rate options for your individual needs. From limited companies, multi-unit blocks to HMO specials – our extensive range spans every area of buy to let. Submit an enquiry and start saving today!
Tax Relief Changes on Buy to Let Mortgages
One key development for UK landlords is the phasing out of full mortgage interest tax relief from 2020 onwards. This major change, combined with rising costs and tax administration hassles has prompted some investors to exit the private rental sector. For committed landlords however, strategic planning and astute use of available tax minimisations can still enhance returns.
- Mortgage interest tax deduction – This is being wound down incrementally until it hits 20% of total interest paid by the 2025/26 tax year
- Refinancing via Limited Company structures – Establishing a Special Purpose Vehicle (SPV) company to hold buy to let investments allows interest to be treated as a business expense
Additionally, speaking with an expert tax adviser and accountant when structuring your buy to let financing is strongly advised. Keeping compliance obligations to a minimum while reducing your overall capital gains and income tax liability is crucial.
As specialist brokers catering to landlords across the country, our team stays well versed on all emerging compliance and tax issues impacting your bottom line. Get in contact today to assess intelligent solutions to optimise your tax position.
Remortgaging Buy to Let Property
Remortgaging buy to let property with an existing portfolio represents one of the most effective ways to extract equity for reinvestment or to slash monthly payments through reduced interest rates. As seasoned advisers assisting hundreds of landlords annually, we help identify prime opportunities to remortgage for optimal gain.
With ever-changing lender criteria and products, the current market depth allows substantial flexibility for investors seeking to refinance. Whether adjusting rate types, release equity, consolidate debt, fund repairs or capital improvements – remortgaging can achieve multiple portfolio objectives.
Average buy to let fixed remortgage rates now stand at 4.05% – still relatively affordable for the flexibility provided versus other instruments like secured loans. As your dedicated financing partner, our independent brokerage sources the most competitive residential and remortgage loan packages from across the industry.
We handle everything from sourcing, applications, liaising with lenders and conveyancers right through to securing formal approval. Avoid the hassle and delay – our tried and tested process is designed for maximum efficiency and speed.
To kickstart your bespoke remortgaging proposition, connect with our buy to let finance experts to review:
- Current deal terms and incentive fees
- Rental demand levels justifying increased LTV
- Tax implications of adjusting loan structures
- Payment shock from rate repricing at expiry
The above allows us to structure a tailored fix, tracker or variable loan ensuring smooth transitions that optimise your investment objectives. With extensive lender relationships, we simplify financing complexity on your behalf. Reach out now to unlock the potential in your portfolio through strategic remortgaging.
