Buy-to-let mortgage rates fall below 2% for the first time

Posted 21 October 2015 by Keith Osborne

A specialist buy-to-ley mortgage provider has introduced a new fixed-rate investor mortgage that breaks below the 2% barrier...

Over recent years, the cost of a new mortgage has fallen dramatically. While homebuyers have benefited from record low interest rates, landlords have also been able to take advantage of some of the most competitive deals in history.

Now, a leading buy-to-let mortgage lender has launched the first ever fixed-rate mortgage below 2%. Accord Mortgages, part of the Yorkshire Building Society, have become the first lender to offer a buy-to-let fixed-rate mortgage with an interest rate at 1.84%, although you will need a 40% deposit (or 40% equity for remortgages).

While there is a £2,495 fee plus an application fee of £130, it means that a landlord can fix a £150,000 interest-only mortgage at just £230 per month for two years - leading to a substantial monthly rental profit.

This Is Money reports that in comparison a first-time buyer choosing a deal at the same interest rate would typically have to pay both capital and interest and would face a monthly payment of £628.

Be sure to compare rates and fees before choosing a deal

As the cost of residential mortgages has fallen, so have buy-to-let mortgage rates. According to financial analysts Moneyfacts, the lowest fixed rate available in 2011 was 3.25%. This fell to 2.99% in 2012 and 2.49% in 2013 and 2014.

Rachel Springall, of Moneyfacts, says: "Buy-to-let is booming, with rents high and interest rates low, there is great potential for perspective landlords to buy and let out a property as a form of income. Now that pensioners have more flexibility with their pension pot, the buy-to-let market will be an attractive area for them to get a regular return on an investment in property.

"Anyone looking into buy-to-let must seek out independent financial advice to be certain they get the most cost-effective deal for them."

While the new Accord Mortgages deal can slash your mortgage payments, experts have warned that you should compare the total cost of all deals before simply picking the lowest rate.

Keith Osborne, editor of Whathouse.com, says: "Just as we encourage residential mortgage borrowers to compare the total cost of a new deal, so landlords must do the same. Fees on low-rate deals can be very high and so it can pay to choose a slightly higher mortgage rate and a lower arrangement fee, particularly on smaller mortgages."

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