Are falling mortgage rates fuelling a rise in buy-to-let investment?
By Sarah Thompson, Managing Director, Mortgage Scout
The latest data from UK Finance shows that in the last quarter of 2024, the average buy-to-let (BTL) interest rate for new mortgage loans taken out was 5.09%, a drop of 0.61% on the previous year. And it seems that falling mortgage interest rates may well be having a positive effect on new investment, with the number of loans for new BTL purchases up by more than 46% in Q4 2024 versus the same period in 2023.
It’s essential to bear in mind that through 2022 and 2023, inflation was peaking, and in the summer of 2023, the base rate reached a 15-year high. There was economic and political instability, a cost-of-living crisis, and considerable uncertainty about rental reforms for England. So, low levels of new BTL investment at the end of 2023 weren’t only due to mortgage rates, and the resurgence over the past six months has probably also been due to pent-up appetite from landlords.
Nevertheless, the rise in the number of landlords buying and remortgaging (total new loans are up nearly 40% year-over-year) is undoubtedly at least partly due to more attractive interest rates. Fixed-rate mortgages are continuing to increase in popularity, with more than two-thirds of landlords choosing fixed-rate products and the number of these loans up 4.4% on Q4 2023.
Lower rates typically mean lower monthly repayments, and this is reflected in the average rental yield, which was 7% in the last quarter of 2024, up almost a quarter of a percentage point from the previous year.
The latest customer survey across LRG revealed that almost a quarter of landlords planned to increase their portfolio in 2025.
Of course, choosing the right mortgage isn’t only about the interest rate. You also need to consider factors such as product fees, early redemption charges, and the overall terms of the loan. It’s essential to speak with a specialist broker who can help ensure you get the most suitable deal for your circumstances.
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