Buy-to-let mortgage rates has risen since Labour’s Autumn Budget, indicating a negative response to Chancellor Rachel Reeves’ announcement on 30th October.
Octane Capital analysed the cost of 75% loan-to-value (LTV) buy-to-let mortgages before and after the Budget.
Since then, the cost for full repayment mortgages has increased by 2.5%, bringing the average monthly payment to £951, up from £928.
Interest-only mortgages have seen a larger rise of 5.9%, with costs rising from £470 to £498 per month.
Mortgage rates increased despite the Bank of England reducing the base rate from 5.0% to 4.75% on 7th November.
Following the Budget, swap rates, which influence borrowing costs, have risen due to concerns about the Chancellor’s proposals.
The Budget raised £40bn in taxes, primarily from an increase in employers’ National Insurance Tax, and also increased the stamp duty surcharge for buy-to-let landlords from 3% to 5% in England and Northern Ireland.
The Consumer Price Index (CPI) inflation also rose from 1.7% to 2.3% in October 2024, limiting the Bank of England’s capacity to make further base rate cuts.
Despite these increases, the average cost of a buy-to-let mortgage remains significantly lower than a year ago.
The average monthly cost fell by 7% from £1,023 in November 2023 to £951 this month.
For interest-only mortgages, costs decreased by 22.8%, from £645 last year to £498 this year.
Jonathan Samuels, CEO of Octane Capital, said: “Labour’s tenure in government hasn’t gone smoothly so far, and that’s reflected by rising buy-to-let mortgage rate since its inaugural Autumn Budget.
“Despite the Bank of England cutting its base rate last month the financial markets don’t seem convinced by the UK’s direction of travel, as higher swap rates have fuelled higher mortgage rates.
“Combined with the government’s move to increase the stamp duty surcharge to 5%, becoming a buy-to-let landlord is becoming more challenging, especially for newcomers to the market.
Samuels added: “The hope is that sentiment changes in the months ahead, which would allow the Bank to continue cutting the base rate, and for buy-to-let rates to fall once again.
“One positive is – despite this blip – monthly mortgage payments are still far lower than a year ago, and that could still represent the long-term trend as we move into 2025.”
