Rates on BTL mortgages have fallen to their lowest levels since the start of September 2022, according to research from Moneyfactscompare.co.uk.
The average two and five-year fixed rates both fell by 5.24% in October. This is lower than the average rates recorded a year ago, of 6.40% and 6.32% respectively.
At the same time, more products are available for BTL borrowers.
Landlords can now choose from 3,277 deals, compared to 2,581 in October 2023 and 988 in 2022.
“These are positive signs for prospective landlords, but there are numerous other factors to consider before taking the leap into the BTL sector, not just the cost of a mortgage,” commented Rachel Springall, finance expert at Moneyfactscompare.co.uk.
It was also revealed in the research the extent to which BTL landlords have been hit by taxation changes in recent years.
For example, since April 2020, private landlords haven’t been able to deduct their mortgage interest from their rental income. Instead, they now receive a tax credit of 20% of their mortgage interest.
This has meant that higher-rate and additional-rate taxpayers now have to pay more tax than they did previously.
This has pushed many landlords to set up limited companies as a result, as a way of managing BTL properties as a more tax-efficient route.
Through limited companies, mortgage interest can be deducted from income and corporation tax paid instead of income tax. This can be of benefit to some landlords.
Moneyfactscompare.co.uk revealed that 5,312 limited companies were set up in September 2024 for BTL purposes.
This is a 28% increase on any previous September, while 70% of new BTL purchases were made via a limited company, according to data from Hamptons estate agents.
