Best buy-to-let mortgage rates – April 2024

5 min Read Published: 22 Mar 2024

Which are the best buy-to-let mortgages?What is a buy-to-let mortgage?

A buy-to-let mortgage is designed for borrowers who wish to purchase a property that will be let to a tenant and not for the buyer to live in. It is the mortgage you will require if you want to rent the property to tenants, as well as if you want to use it as a holiday let. Generally speaking, lenders don't permit you to rent out your property if you have a standard residential mortgage. Buy-to-let mortgages are offered using slightly different lending criteria and you may need a larger deposit than you would do for a standard residential mortgage.

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How does a buy-to-let mortgage work?

The majority of buy-to-let landlords choose to take out interest-only mortgages, which means they have much lower monthly repayments than if they were paying off the capital as well. The monthly mortgage payment is typically covered by the rent you charge on the property, with the debt on the property itself only needing to be paid off at the end of the mortgage term.

While the cost of an interest-only mortgage is much lower than for a standard residential repayment mortgage, additional costs are involved in becoming a buy-to-let landlord, including the initial outlay of between 20% to 40% of the property's value as a deposit. You may also need to consider the costs associated with managing the property or paying a letting agent to do so as maintenance of the property and tenant management can be time-consuming and costly.

More information about the benefits and potential pitfalls can be found in our article "The complete buy-to-let guide - all you need to know".

How to find the best buy-to-let mortgage

The optimum buy-to-let mortgage is going to be dependent on your particular circumstances. Below we have outlined the best buy-to-let mortgages currently available in the UK, taking into consideration the initial interest rate, the lender fee and the standard variable rate (SVR) that you will revert to at the end of your buy-to-let mortgage deal. The initial interest rate is usually payable for a specific number of years which is the mortgage deal term and most borrowers switch to another mortgage deal once this term expires. If you do not switch your buy-to-let mortgage deal at the end of the mortgage deal term then you will start paying interest based on the standard variable rate (SVR) charged by your mortgage lender.

These deals from across the market illustrate the typical best buy-to-let mortgage deals based on a property price of £350,000 where the mortgage is taken over 25 years. We detail the most competitive buy-to-let deals based on 80%, 70% and 60% loan-to-value (LTV) to provide the best rates on varying levels of deposit.

To find the best buy-to-let mortgage deals in the market based on your specific requirements, go to our mortgage best-buy calculator, powered by Habito*, which gives you tailored results. Mortgage brokers like Habito will search the mortgage market on your behalf to source the best mortgage deals to suit your needs and you can find other mortgage brokers near you by using the directory services provided by VouchedFor* or Unbiased* - both directories allow you to search financial professionals in your area that have been vetted by other customers.

Best buy-to-let mortgage deals

Based on a property valued at £350,000, funded by a repayment mortgage over a mortgage term of 25 years with the lender fees paid upfront.

Cheapest 2-year fixed-rate buy-to-let mortgages

Provider Loan-to-value (LTV) Initial interest rate Rate after 2 years Lender fee
West One 60% 2.89% 10.24% £21,898
West One 70% 2.89% 10.24% £25,395
Suffolk Building Society 80% 4.79% 8.69% £8,968

Cheapest 5-year fixed-rate buy-to-let mortgages

Provider Loan-to-value (LTV) Initial interest rate Rate after 2 years Lender fee
Birmingham Midshires 60% 4.10% 9.59% £4,099
The Mortgage Works 70% 4.14% 8.99% £7,864
Newcastle Building Society 80% 4.75% 6.94% £1,469

Cheapest 2-year variable-rate buy-to-let mortgages

Provider Loan-to-value (LTV) Initial interest rate Rate after 2 years Lender fee
Mansfield Building Society 60% 5.19% 8.89% £5,851
Mansfield. Building Society 70% 5.19% 8.89% £6,726
Furness Building Society 80% 5.59% 8.69% £1,490

Best buy-to-let remortgage deals

Based on a property valued at £350,000 where you are remortgaging the balance of your existing mortgage over a mortgage term of 25 years with the lender fees paid upfront.

Cheapest 2-year fixed-rate buy-to-let mortgages (remortgage)

Provider Loan-to-value (LTV) Initial interest rate Rate after 2 years Lender fee
West One 60% 2.89% 10.24% £21,898
West One 70% 2.89% 10.24% £25,395
Suffolk Building Society 80% 4.79% 8.69% £8,728

Cheapest 5-year fixed-rate buy-to-let mortgages (remortgage)

Provider Loan-to-value (LTV) Initial interest rate Rate after 2 years Lender fee
The Mortgage Works 60% 4.14% 8.99% £6,814
The Mortgage Works 70% 4.14% 8.99% £7,864
Newcastle Building Society 80% 4.75% 6.94% £1,469

Cheapest 2-year variable-rate buy-to-let mortgages (remortgage)

Provider Loan-to-value (LTV) Initial interest rate Rate after 2 years Lender fee
Mansfield Building Society 60% 5.19% 8.89% £5,851
Mansfield Building Society 70% 5.19% 8.89% £6,726
Furness Building Society 80% 5.59% 8.69% £1,135

Cheapest 5-year variable-rate buy-to-let mortgages (remortgage)

Provider Loan-to-value (LTV) Initial interest rate Rate after 2 years Lender fee
Newbury Building Society 60% 5.25% 7.00% £1,400
Newbury Building Society 70% 5.25% 7.00% £1,400

What do you need to know before applying for a buy-to-let mortgage?

How much do buy-to-let mortgages cost?

While the interest-only monthly repayment can seem low compared with a repayment mortgage, you can expect to pay a higher interest rate than you would for a residential mortgage product. You also need to add to this the larger deposit that will be required to secure the mortgage - mortgage lenders generally require a minimum of 15% of the property purchase price as a deposit.

If you already own a property, you can also expect to pay a 3% levy on stamp duty on your purchase as it will be classified as an "additional property". This will be on top of the usual stamp duty rate. For more information on this, check out our article "Everything you need to know about stamp duty".

Stamp duty on a buy-to-let or second property

Property purchase price Rate of Stamp Duty Land Tax
£0 - £40,000 0%
£0 - £250,000 3%
£250,001 - £925,000 8%
£925,001 - £1.5 million 13%
£1.5 million upwards 15%

How much can you borrow on a buy-to-let mortgage?

Several factors will determine the total amount you can borrow:

  • The level of deposit you have
  • The rental income you can reasonably expect to make
  • Your financial circumstances, including your income and credit history

To ensure you have a good buffer, it is a good idea to look for a rental income that is between 130% and 150% of the mortgage costs. This allows for the expenses that are likely to occur and the potential for void periods when the property stands empty between tenants.

What returns can you expect on your buy-to-let investment?

The yield you can expect to secure from your buy-to-let property will be determined by the purchase price, the area the property is in and how high the costs are associated with letting and maintaining it. It pays to thoroughly research the market and to speak to local agents who can advise you on the average yields for that area and point you to suitable properties.

In the table below, we outline the average yields for different regions in the UK for November 2023:

Region Average rental yield
London (outer) 4.70%
London (central) 4.40%
South East 5.00%
South West 5.50%
West Midlands 4.60%
East Midlands 5.50%
North East 5.30%
North West 5.70%
Yorkshire and the Humber 5.60%
Wales 5.80%

Source: www.statista.com (November 2023)

For more details, read our article "How much can I make from a buy-to-let investment".

 

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