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Buy-to-let landlords look to two-year mortgage deals amid Brexit uncertainty

Find out how to get the best mortgage rate for your investment property

Landlords are increasingly taking out two-year buy-to-let mortgages as uncertainty around Brexit continues.

That’s according to data from Commercial Trust, which shows two-year deals now make up 39% of buy-to-let applications, up from just 26% last year.

Here, Which? explains why landlords are looking to fix their deals for shorter terms, and reveals the best buy-to-let mortgage rates currently available.


Landlords seeking two-year deals

It’s been a difficult few years for landlords, with a whole host of changes to taxation and lending criteria cutting margins and making it more difficult to get a mortgage.

This has resulted in some investors selling their buy-to-let properties, and others focusing on refinancing their portfolios rather than expanding them further.

And now, new figures from specialist broker Commercial Trust show that landlords are taking a short-term approach when it comes to mortgage deals, with four in 10 opting for two-year deals in the first half of 2019. But why have two-year fixes seen such a jump in popularity?

Borrowers looking to ride out Brexit storm

In the residential market, borrowers are flocking to five-year fixes as they look to secure cheap rates during this time of economic uncertainty. But in the buy-to-let sector it appears the trend is moving in the opposite direction.

Commercial Trust says that while five-year fixes are still the most popular buy-to-let product overall, the boost in two-year applications is down to Brexit.

Andrew Turner of Commercial Trust says: ‘Many landlords are looking to hedge their bets for the short term with a competitive, low-rate mortgage which will hopefully last beyond [Brexit] uncertainty, without locking them into a long-term agreement.

‘Fixing for two years gives a landlord the opportunity to reassess the market much sooner and to consider remortgaging in two years’ time, without necessarily incurring additional early-repayment charges.’

Best rates on two-year fixes for landlords

Landlords looking for a cheap two-year fixed-rate deal have a wide array of options, and rates remain very attractive.

That said, buy-to-let mortgages come with many variables, and the deal you will be able to get will depend on the size of your portfolio and how much rent you’re bringing in.

For example, the Barclays mortgage listed in the table below (1.42% initial rate) is available for landlords with up to 10 properties, while the Post Office product (1.48%) is only available to landlords with up to three properties.

If you want to know more about the deals below, visit the lenders’ websites.

Best introductory remortgaging rates at 60% loan-to-value

Lender Initial rate Revert rate APRC Fees Cashback Max. portfolio size*
Barclays 1.42% 5.24% 4.7% £1,795 £500 10
Post Office 1.48% 5.24% 4.7% £1,495 None 3
Leeds BS 1.49% 4.99% 5.1% £1,999 None 10


Best introductory remortgaging rates at 75% loan-to-value

Lender Initial rate Revert rate APRC Fees Cashback Max. portfolio size*
Sainsbury’s 1.67% 5.24% 4.7% £1,995 £250 3
Barclays 1.68% 5.24% 4.7% £1,795 £500 10
Post Office 1.69% 5.24% 4.7% £1,495 None 3

Source: Moneyfacts, 30 July 2019. *Maximum number of mortgaged properties in portfolio at time of application. 

Fee-free mortgages for landlords

As you can see in the tables above, the top-rate mortgage deals tend to come with high initial fees of up to £1,995. And if you’re only locking in a rate for two years, you could face another steep fee when applying for a new deal in 2021.

The good news is that the number of fee-free deals on the market has increased in the last year or two. These incentives come at a cost, however.

If you want a mortgage with no upfront fees, you’ll pay a premium of around 0.5%-0.6% on the introductory rate.

At 60% LTV, the best two-year fee-free fix is priced at 1.91% (NatWest), while the best 75% rate is 2.24% (Platform).

Cashback buy-to-let mortgages

Some lenders have begun to offer cashback on their buy-to-let deals, as they try to tempt landlords looking to remortgage. But is it possible to get a deal that is both fee-free and comes with cashback?

60% LTV

At 60%, both Santander (2.04%) and Sainsbury’s (2.11%) offer fee-free deals that come with £250 cashback for people remortgaging.

The highest amount of cashback on a fee-free deal is £500 from Barclays, though the mortgage has an initial rate of 2.21%.

75% LTV

At 75%, Sainsbury’s (2.26%) offers the best fee-free rate with cashback, although this is only available on mortgages on new purchases, rather than remortgaging.

Landlords who are remortgaging can get £250 cashback from Santander, albeit with an initial rate of 2.29%.

Things landlords need to know

It’s a tumultuous time to be a landlord, with the recent tenant fees ban the latest in a long line of reforms affecting buy-to-let investors.

And there could be more changes to come, as the government consults on abolishing the Section 21 eviction process.

In such a confusing time, you can learn more about the main reforms affecting investors in our story on things landlords need to know in 2019.

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