UK Landlords Face Higher Buy-to-Let Mortgage Costs Amid Falling Rates

Buy-to-let mortgage rates have recently declined, but landlords whose five-year fixed-rate deals are expiring are still facing substantial cost increases. Lenders, including Nationwide's buy-to-let arm The Mortgage Works, have reduced rates multiple times in June, offering some relief amidst rising tradesmen costs, increased regulation, and a less favorable tax environment.

According to UK Finance, there are nearly two million buy-to-let properties with an attached mortgage. The average two-year fixed-rate buy-to-let mortgage currently stands at 5.24 percent, and the average five-year fix is 5.58 percent, as reported by Moneyfacts. The lowest available five-year fixed rate is 3.99 percent, while the lowest two-year fix is 2.7 percent, though the latter often comes with significant fees.

Many landlords who secured mortgages in recent years benefited from ultra-low rates, with some purchasing five years ago at an average fixed rate of around 2.5 percent. For a £200,000 mortgage, this meant monthly costs of approximately £417. Today, remortgaging at the current average five-year fixed rate of 5.58 percent would result in monthly payments of about £929, excluding fees. This surge in costs, combined with other expenses such as void periods, repairs, and agent fees, places pressure on landlords to increase rents to maintain profitability.

Despite current rate increases, the situation is not as severe as during the summer of 2023, when the average two-year fixed rate for buy-to-let peaked at 6.97 percent and five-year fixes reached 6.82 percent. Rents have also risen considerably during this period.

Navigating Mortgage Options

Landlords are now contemplating whether to fix their rates or opt for a tracker mortgage. Fixing for five years provides payment certainty and may allow for higher borrowing amounts due to lenders' typically more lenient affordability tests under such arrangements. Lenders assess affordability using the interest coverage ratio (ICR), requiring gross rental income to cover mortgage payments with a buffer. For lower-rate taxpayers, this is often 125 percent, rising to 145 percent for higher-rate taxpayers. Lenders also stress-test mortgages by adding 1-2 percent to the rate to account for potential increases.

Opting for a two-year fix may offer slightly lower initial rates, appealing to those expecting interest rates to fall in the near future. Tracker mortgages, which follow the Bank of England's base rate plus a margin, could also be beneficial if rates decrease. For example, a tracker at base rate plus 0.5 percent would currently cost 4.25 percent with a 3.75 percent base rate. If the base rate fell to 3 percent, the tracker rate would drop to 3.5 percent. A key advantage of trackers is the absence of early repayment charges, allowing flexibility to switch to a cheaper fixed deal if rates fall. However, if rates remain stable or rise, a tracker could become more expensive.

Best Buy-to-Let Mortgage Deals

As of July 2, 2026, some of the most competitive buy-to-let mortgage rates for landlords owning properties in their personal name include:

For 60% loan-to-value (LTV) mortgages:

• A five-year fixed rate from The Mortgage Works (TMW) at 3.99 percent with a 3 percent arrangement fee and a £280 valuation fee.
• A five-year fixed rate from NatWest at 4.72 percent with no arrangement fees and £350 cashback.
• A two-year fixed rate from NatWest at 4.88 percent with no arrangement fees and £350 cashback.
• A two-year fixed rate from HSBC at 4.88 percent with no fees.

For 75% loan-to-value (LTV) mortgages:

• A five-year fixed rate from Bank of Ireland at 4.74 percent with a £995 arrangement fee and £500 cashback.
• A five-year fixed rate from NatWest at 4.9 percent with no arrangement fees and £350 cashback.
• A two-year fixed rate from HSBC at 4.99 percent with no arrangement fees.
• A two-year fixed rate from Bank of Ireland at 4.74 percent with a £995 arrangement fee and £300 cashback.

For two-year trackers without early repayment charges:

• At 60% LTV, BM Solutions offers a tracker at 4.2 percent with a 1 percent fee and £300 cashback (base rate plus 0.45 percent).
• At 75% LTV, BM Solutions offers a tracker at 4.4 percent with a 1 percent fee and £300 cashback (base rate plus 0.65 percent).

These rates consider the overall annual cost, including initial rates, fees, and cashback, based on a £200,000 property value for remortgage deals. It is important to note that many of the lowest rates come with substantial product fees, sometimes as high as 10 percent of the mortgage amount. Securing the cheapest deals often requires a deposit or equity of at least 40 percent. Landlords are advised to consult with mortgage brokers to navigate the market and find suitable deals, acknowledging that most buy-to-let mortgages are not regulated by the Financial Conduct Authority.