Flat buy-to-let averages mask lender moves of up to 0.40 points

Average buy-to-let rates were effectively unchanged in the latest Moneyfacts figures, but individual lenders still moved selected products by as much as 0.40 percentage points.

The average two-year fixed buy-to-let rate dipped by 0.01 points to 5.59%, while the average five-year fix held at 5.63%, according to figures reported by Mortgage Strategy. That is a quiet headline, not a static market.

Halifax, Leeds Building Society, TSB, Lloyds and Bank of Ireland were reported to have cut some products by about 20 basis points. But the moves were not one-way: Hodge increased selected retirement interest-only deals by up to 40 basis points, and Earl Shilton raised some tracker and discounted variable products by 25 basis points. For landlords, that means average pricing is a weak guide if a specific deal is close to expiry.

The real pressure point is reversion risk

The immediate issue for landlords is any mortgage due to end in the next 3 to 12 months. If a fixed or discounted period expires before a refinance is lined up, the loan may move onto a lender’s standard variable rate or other reversion product, with a sharp jump in monthly payments.

A working refinance schedule should show for each loan:

• product end date
• current rate type
• reversion rate
• early repayment charge end date
• monthly payment after reversion

That gives landlords a clear order of urgency instead of relying on market averages or waiting for a broader rate trend to emerge.

London portfolios are vulnerable to small pricing changes

In London, relatively small rate moves can do outsized damage to cashflow. Higher rents do not necessarily mean wider margins once borrowing costs are combined with service charges, licensing, repairs, insurance and void risk. On some leasehold flats, especially where major works are pending, an extra 25 to 40 basis points can materially weaken debt coverage and narrow remortgage options.

That exposure is often greater where a property already has lender-sensitive features such as a short lease, weak EPC, high service charges or uneven rent history.

Flat averages do not mean the market has settled

The only firm conclusion from the latest figures is that average pricing was broadly steady. They do not show where lenders will move next.

That matters because landlords often make two costly assumptions in a quieter month: that most lenders are holding rates, and that the next change is more likely to be down than up. The latest repricing shows neither assumption is safe.

Stress-test before refinancing season starts

A refinance decision should be tested against more than the headline quote. At minimum, landlords should model each property or loan:

• at the current refinance rate
• at +25bps
• at +40bps
• with one void period
• with one unavoidable repair cost

For leasehold property, service-charge volatility should be modelled separately. In practice, that can move at the same time as mortgage costs and turn a workable refinance into a strained one.

Mortgage costs do not change the rent rules

Higher borrowing costs do not give landlords any special right to raise rent outside the tenancy terms or the statutory process. If a rent increase is being considered because refinancing costs have risen, the correct legal route still depends on the tenancy and the notice procedure that applies.

What landlords should do now

Three steps are worth taking immediately:

1. List every buy-to-let mortgage ending in the next 12 months and calculate the payment at reversion.
2. Obtain live quotes for deals ending in the next 3 to 6 months, including both product-transfer and remortgage options.
3. Stress-test each loan at the quoted rate, +25bps and +40bps before deciding to wait.

If you need to map upcoming mortgage expiries across a London portfolio and compare refinance options against likely rental cashflow, Rentals & Sales can help you review the risk property by property before loans roll onto higher reversion rates.