Portfolio landlords could save as much as £8,500 by remortgaging onto current lower buy-to-let rates, according to new analysis, but risk paying thousands extra if they don’t act.
Buy-to-let (BTL) property portfolio investors who fail to refinance to fix their mortgage could see their monthly mortgage costs climb by over £23,000, the research by specialist property finance expert, Rangewell, has found.
Rangewell analysed the average amount owed through BTL mortgage borrowing by the average portfolio landlord. Then it looked at how much better off they could be today when coming to the end of a two year fixed term mortgage as a result of improving mortgage rates.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Finally it estimated the cost they could incur by failing to remortgage and reverting to a standard variable rate.
Latest Videos FromMoneyWeek
The research shows two years ago the average portfolio investor held 8.6 BTL properties financed across 5.8 loans to the tune of £503,680 in BTL mortgage borrowing owed.
At the time, the average two year, fixed rate BTL mortgage product, at a 75% LTV, would have seen them offered an average mortgage rate of 4.78%.
Based on the level of borrowing at £503,680, this would have equated to an interest-only monthly mortgage repayment of £2,006 per month.
Fast forward to today and the average rate for the same mortgage type has fallen to 3.93% thanks to improvements to the mortgage landscape.
As a result, those coming to the end of a fixed-rate term today and taking a pro-active approach to refinancing could see the average monthly cost of their portfolio mortgage fall to £1,650 per month when making an interest-only repayment.
That’s a reduction of £357 per month, or £8,563 over the course of a renewed two year term.
However, failing to refinance and reverting to standard variable rate could be a costly mistake. In doing so, the average portfolio landlord could see their mortgage rate jump to 7.09%.
This would push the monthly cost of their interest only mortgage repayment to £2,976, an increase of £970 per month, which over the course of a renewed two year term would equate to an increase of £23,270.
Alasdair McPherson, head of partnerships at Rangewell, said: “The mortgage market has moved decisively back in favour of portfolio landlords – but the gap between best-in-market rates and legacy rates that landlords can fall into through lack of research or professional funding support is now dangerously wide.”
Opportunities in buy-to-let
For portfolio landlords there are strong refinance and re-leveraging opportunities in several specialist sectors, according to Rangewell’s McPherson.
Semi-commercial properties (e.g. flats above retail)
Lender appetite for mixed-use portfolios has increased substantially, McPherson has found. This is one area where refinance terms – and rental yields – are often better than those available to pure residential portfolios, it added.
Holiday let portfolios
Yields in this sector have always been strong, Rangewell said, but underwriting has historically been stricter. Now, McPherson is seeing a growing number of lenders actively open to well-managed holiday let portfolios, meaning refinancing can not only cut costs but also unlock equity for further acquisitions.
Supported living and social care portfolios
These portfolios have historically proved problematic for many landlords, as most lenders didn’t understand the business model. There is now a much wider range of specialist lenders who actively understand and support supported living, according to McPherson, making a huge difference in terms of refinance and expansion potential.
Foreign investors with UK property portfolios
Historically, overseas landlords have faced much higher interest rates due to their lack of UK credit history. More lenders are now recognising this growing asset class, and are willing to offer competitive terms, McPherson said. That allows these landlords to reposition their portfolios more profitably with mainstream or specialist lenders.
HMOs (Houses in Multiple Occupation)
Lender appetite is especially strong in this sector, particularly for professional and student HMOs where rent-to-loan coverage is robust. McPherson said with the right approach, landlords can access rates on par with standard BTL, delivering substantial savings and enhanced portfolio returns.
Multi-unit freehold blocks (MUFBs)
These remain a “lender sweet spot”, according to McPherson, especially where five or more self-contained flats sit under one title. “With the right rent roll and valuation evidence, we can often secure rates close to standard BTL terms, even at scale,” he added.
