Lender blames Autumn Budget for rising BTL mortgage costs

Since the Budget the monthly costs of buy-to-let mortgage have risen by 2.5% for full repayment or 5.9% for interest-only mortgages, says Octane Capital’s CEO Jonathan Samuels (pictured).

Consequently, the average monthly cost for a repayment mortgage has gone up from £928 to £951, while interest-only mortgage costs have risen from £470 pre-budget to £498.

Rising swap rates

BTL mortgage rates are rising despite the reduction in the base rate. That’s because, since the budget, swap rates – which influence the cost of borrowing – have been rising, indicating that the markets are concerned about measures announced in Rachel Reeves’ Budget.

But it is still significantly cheaper to take out a buy-to-let mortgage than it was a year ago. The average monthly cost of a buy-to-let mortgage has dropped by 7% from £1,023 in November 2023 to £951 the same month this year.

For interest-only mortgages, the difference is even greater, at -22.8%, from £645 in November last year to £498 in November 2024.

And those monthly payments are cheaper despite house price gains over the period.

The financial markets don’t seem convinced by the UK’s direction of travel.”

Samuels adds: “Labour’s tenure in government hasn’t gone smoothly so far, and that’s reflected by rising buy-to-let mortgage rate since its inaugural Autumn Budget.

“Despite the Bank of England cutting its base rate last month the financial markets don’t seem convinced by the UK’s direction of travel, as higher swap rates have fuelled higher mortgage rates.

“Combined with the government’s move to increase the stamp duty surcharge to 5%, becoming a buy-to-let landlord is becoming more challenging, especially for newcomers to the market.

“The hope is that sentiment changes in the months ahead, which would allow the Bank to continue cutting the base rate, and for buy-to-let rates to fall once again.

“One positive is – despite this blip – monthly mortgage payments are still far lower than a year ago, and that could still represent the long-term trend as we move into 2025.”