As we move into summer, the UK property and mortgage market remains steady. Understanding the current lending landscape is crucial for buy to let landlords, especially with SWAP rates, rental calculations, and Base Rate speculation all playing a part in shaping your investment decisions.
Here’s a round-up of this week’s key developments and what they mean for you as a landlord.
SWAP Rates & Mortgage Pricing: Stability, Not Surprises
SWAP rates, the underlying cost of fixed-rate mortgages, have remained virtually unchanged over the past few weeks. 2 and 5-year SWAPs are sitting at around 3.78%, slightly higher than a month ago but lower than this time last year.
What does this mean for mortgage pricing? In short, lenders’ cost of funds hasn’t shifted significantly. As a result, we’re unlikely to see any significant rate reductions unless lenders are willing to sacrifice profit margins. For now, expect pricing to remain stable.
With that in mind, it's worth reconsidering if you're holding off on remortgaging or purchasing in the hope that rates will fall after the August Base Rate review. Any anticipated changes to the base rate have already been factored into current SWAP rates, meaning we’re unlikely to see a meaningful shift in fixed mortgage pricing in the short term. In other words, waiting may not yield the savings you’re hoping for, and could mean missing out on today’s competitive deals.
Find your next BTL mortgage rate here >>
Rental Calculations: A Welcome Ease for Borrowing Power
One of the more positive shifts for landlords is the easing of rental stress tests. As interest rates have softened and rents have risen, lenders are beginning to relax their affordability calculations.
Notably, Skipton and The Mortgage Works have adjusted their rental calculations, particularly on 5-year fixed products, making borrowing more against rental income easier.
For Personal Borrowers (Standard Property):
- Most generous: 145% coverage at 4.34% = borrow up to 221x monthly rent
- Average: 145% at 4.5% = borrow around 184x monthly rent
For Limited Company Borrowers (Standard Property):
- Most generous: 125% at 4.49% = borrow up to 224x monthly rent
- Average: 125% at 5.39% = borrow around 135x monthly rent
While Limited Companies often benefit from more favourable tax treatment, higher interest rates can offset this advantage. Still, the overall trend is encouraging, especially for those who struggled to make the numbers work during the peak of rate hikes.
Find your next BTL mortgage rate here >>
Base Rate Outlook: Don’t Bet on Big Cuts Just Yet
There’s been some buzz around the Bank of England potentially cutting the Base Rate. However, this is largely speculative. While Andrew Bailey has hinted at a more flexible approach if inflation drops below 2%, that scenario isn’t expected in the near term.
Inflation remains sticky, and the Bank is likely to proceed cautiously. So, while it’s good to know rate cuts are on the table, don’t expect them to arrive quickly.
House Prices: Mixed Messages, Modest Growth
Recent data from Nationwide and Halifax paint a conflicting picture. Nationwide reported a 0.5% rise in May, while Halifax claimed a 4% drop. On an annual basis, both agree on modest growth, between 2.5% and 3.5%.
Despite economic headwinds, the property market is holding up better than many expected. Low unemployment, rising wages, and resilient mortgage approvals are helping to support prices.
That said, buyer hesitation remains. Many are waiting for lower rates before committing, which is slowing down transactions. If you’re trying to sell, you’re not alone in finding the market sluggish.
Landlord Sentiment: Signs of Stabilisation
New research from SpareRoom offers a glimmer of hope. In February, 67% of landlords said they planned to exit or reduce their portfolios. By May, that figure had dropped to 57%.
Confidence is still low, with 76% of landlords reporting having little or no faith in the market; however, this is an improvement from 88% earlier this year.
This shift suggests landlords are beginning to adapt to the new normal. While challenges remain, the easing of rental calculations and stabilising rates may be helping to restore some optimism.
Final Thoughts: Is Now the Time to Act?
If you paused your investment plans last year due to affordability constraints, now might be the time to revisit them. With rental calculations improving and interest rates softening, the numbers may finally stack up.
Likewise, if you’ve been holding off on a remortgage, it’s worth checking again, especially if your current deal is nearing expiry.
Find your next BTL mortgage rate here >>
Next Steps
As always, every landlord’s situation is unique. If you’d like tailored advice or want to explore your options, call us at 0345 345 6788 or get in touch here.
