New Two-Year Tracker and Fixed-Rate BTL Mortgages: What London Landlords Need to Know

Mortgage Works and ModaMortgages Expand Buy-to-Let Mortgage Options

Recently, The Mortgage Works (TMW) launched new two-year tracker mortgage products for buy-to-let (BTL) landlords, alongside reductions in selected fixed-rate BTL deals. Meanwhile, ModaMortgages expanded its BTL offering with limited-edition two-year fixed-rate products. These changes present an opportunity for London landlords to review their financing and assess whether these options suit their investment strategies.

Understanding the Current Interest Rate Environment

Interest rates remain volatile, with the Bank of England base rate at 5.25% as of June 2024. Two-year tracker mortgages typically follow this base rate plus a lender margin, offering flexibility and potentially lower initial payments if rates remain stable or decrease. Fixed-rate deals provide payment certainty, protecting landlords against rising rates for the fixed-term duration.

TMW’s two-year tracker products often include a "switch to fixed" option, enabling landlords to convert to a fixed rate during the term without penalty. This feature offers a balance between initial flexibility and future rate security amid economic uncertainty.

ModaMortgages’ limited-edition two-year fixed rates add competitive variety, catering to landlords with differing risk tolerances and cash flow preferences.

Practical Considerations for Different Landlord Profiles

• Single-Unit Landlords: Fixed-rate deals may provide predictable costs, offering peace of mind. However, if cash flow is constrained and some payment variability can be managed, a tracker with a switch option might reduce initial expenses.

• HMO and Portfolio Landlords: Those managing larger portfolios or HMOs may benefit from flexibility by combining tracker and fixed products to optimise borrowing costs and budgeting.

• Accidental Landlords: Less experienced landlords should seek professional advice to understand trackers versus fixed rates, particularly regarding payment fluctuations and potential early repayment charges.

Recommended Next Steps

1. Review existing mortgage terms: Understand break clauses, early repayment charges, and any switching options.
2. Assess your risk tolerance and cash flow: Decide between payment stability and flexibility.
3. Compare new mortgage rates and features: Consult lender websites and mortgage brokers for up-to-date information.
4. Consult your mortgage adviser or broker: Discuss if switching mortgage products suits your circumstances.
5. Inform your letting agent: Ensure they are aware of your mortgage position for rent setting and tenant communication.
6. Monitor market developments: Stay informed about lender rate changes or new product launches.

Benchmarking and Support

Interest rates and fees vary by lender, borrower, and property. London landlords should benchmark locally using broker advice or comparison tools. Average London BTL mortgage rates currently range from about 6.5% to 7.5% for two-year fixed deals, with slightly lower rates for trackers depending on margins.

Our team at How Rentals & Sales offers portfolio reviews, mortgage audits, and compliance checks to optimise financing strategies and ensure regulatory alignment. Contact us for tailored advice based on your property portfolio and investment goals.

This article is for informational purposes only and does not constitute financial advice. Landlords should consult mortgage professionals and financial advisers before making decisions.