Buy-to-let mortgage rates are at their lowest in five years, according to new figures from the Bank of England.
The average two-year fixed rate buy-to-let mortgage fell to 2.76% in February, lower than the 2.82% recorded in January and the 3.29% recorded in February 2016.
It is also the lowest average two-year fixed rate since January 2012, when the rate was 5.28%.
The figures will provide some good news for landlords, despite the raft of regulation changes that have hit the sector in the past year.
Steve Olejnik, chief operating Mortgages for Business, said: “February’s fall in the average two-year fixed buy-to-let mortgage rate was broadly in line with our own experiences. While our average of 2.90% for February is slightly higher than the Bank of England’s, this is based on products at a number of different loan-to-value (LTV) ratios.
“The average interest rate paid by buy-to-let borrowers is now substantially lower than it was a year ago, providing investors with strong savings. While these falls do not entirely mitigate the financial impact of the regulatory changes to the sector, they do provide some breathing room.”
Last year, the government increased stamp duty on second homes as part of its plans to curb the buy-to-let market and free up property for first-time buyers.
From April, mortgage interest relief for residential buy-to-let properties is set to be reduced to the base income tax rate, which is 20%.
The Bank of England has also introduced tougher underwriting standards and affordability checks to make sure borrowers can cover the cost of their mortgage in the event of an interest rate rise.
“Although cheaper rates are definitely a positive for landlords looking to grow their portfolios, the broader regulatory environment is challenging. In order to reduce their tax liabilities, landlords should always speak to a professional tax adviser, and should also consider borrowing through a limited company structure,” said Olejnik.
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