Buy to let interest rates are expected to decrease throughout 2025. But how do landlords know if they are getting a worthwhile deal? We take a look…
What is Buy to Let?
Buy to Let is when a property is bought to rent, rather than to live in.
Many landlords will buy a property to rent out and use it as a form of income. When following this model, the investor can choose to be an active landlord, dealing with finding tenants and the ongoing tenancy, or working with a property management company who can handle everything for them.
Buy to lets can be a lucrative venture, as long as the rental yield is strong and the landlord is able to reduce void periods.
For landlords looking to work with experienced property managers in London, get in touch with J Property Management today and find out how we can help with your rental!
How are Buy-to-Let Mortgages Different From Regular Mortgages?
Buy to Let mortgages work largely in the same way as standard residential mortgages but there are a few key differences potential landlords should be aware of:
- Larger deposit (usually between 20-40% of the property value)
- Higher interest rates
- Higher fees
- Some options for mortgages are interest-only
- Stricter eligibility criteria
What this means in practice is that buy to let mortgages are not only harder to secure, but they can be more expensive too – especially if interest rates are high.
What Are The Current Buy to Let Interest Rates?
General mortgage rates in the UK are going down and are predicted to keep falling throughout 2025. In May 2025, the Bank of England cut interest rates from 4.5% to 4.25% – the second cut of the year. Experts predict that the base rate may fall to as low as 3.5% by the end of the year.
As a result, Buy to Let mortgage rates will also fall over the course of the year. However, they are still a more expensive form of mortgage. The best Buy to Let mortgage with a 2 year fixed rate incurs fees of 9.99% according to the Homeowner’s Alliance – an extremely expensive rate in the world of mortgages.
What is the Difference Between Fixed Rate and Variable Buy to Let Mortgages?
Fixed rate Buy to Let: With a fixed rate Buy to Let mortgage, the interest rate will stay the same throughout the duration of the loan. This means that each month you will pay the same amount, making it easy to budget and financially plan. It can protect buyers from any interest rate hikes but also means they may not benefit from savings in periods of low interest rates.
Variable Rate Buy to Let: With a variable rate Buy to Let mortgage, the interest will fluctuate based on market conditions. This means that your monthly payment will be a different amount each month. These types of mortgages can start with lower initial rates but could increase substantially if market interest rates rise.
How Do Buy to Let Interest Rates Affect Landlords?
If landlords have a variable-rate Buy to Let mortgage, their monthly repayments will fluctuate as interest rates change – higher monthly repayments when interest rates increase, lower monthly repayments when interest rates drop. Fixed-rate Buy to Let mortgage holders will be affected when the fixed-term period of their mortgage ends. After that, their mortgage will be standard variable rate (SVR) which will also move up and down as interest rates rise and fall.
Changing interest rates also impact landlords when it comes to refinancing or re-mortgaging. The interest rates offered to landlords will depend on the wider economic landscape. In a time of higher interest rates, re-mortgaging can end up being more expensive, leaving landlords with higher monthly payments or reduced equity.
If mortgage rates increase, landlords will end up spending more money each month – eating into their rental yield and reducing profit. And conversely, in times of lower interest rates, landlords may have increased rental yields and greater profits.
Interest rates for Buy to Let mortgages could also influence property prices. Higher interest rates could lead to reduced demand in the property market as properties become more unattainable. This could mean that the value of a Buy to Let property could experience a slower price growth or even a decline.
Which Companies Offer The Best Buy To Let Interest Rates?
According to Buy to Let mortgage comparison site, MoneyFactsCompare, the best rate for a 2 year fixed Buy to Let mortgage is The Mortgage Works – with an initial rate of 2.79%, an Annual Percentage Rate of Charge (APRC) of 7.8% and 65% Max LTV. For a 5 year fixed Buy to Let mortgage on the same site, The Mortgage Works for an initial rate of 3.74%, a 7.1% APRC and 65% Max LTV.
The Home Owners Alliance site has rates for 2 year fixed Buy to Let mortgages at an initial rate of 1.69% through West One but with fees of 9.99%. For a 5 year fixed Buy to Let, the best rate was BM solutions with an initial rate of 3.81% and fees of 3%.
What is the Average Return on Investment for Buy to Let in the UK?
In 2024, Natwest claimed that the average rental yield in the UK is between 5% and 8%. Generally speaking, rental yields of around 5-6% are classified as ‘good’ and ‘very good’ for upwards of 6%. The rental yield will also depend on the area. For example, less populated areas may experience higher rental yields of 8% or more, whereas areas like London have a lower rate of around 2.5% to 4.5%. (RPA Group)
Is 2025 a Good Moment for Landlords to Invest in Buy to Let?
2025 could mark a good moment for landlords when it comes to investing in Buy to Let properties for a few reasons:
- Rental demand continues to rise – Homeownership remains inaccessible for many, meaning that there is a rise for people looking to rent.
- Stabilised interest rates – Following years of rising interest rates, 2025 is showing signs of stability and even slight decreases making Buy to Let mortgages potentially more affordable.
- Property values increasing – Landlords may experience the appreciation of their property value making their investment more profitable in the long-term.
Buy to Let Interest Rates in 2025
Generally speaking, landlords with an existing Buy to Let mortgage, or looking to invest in a Buy to Let property, could have a good outlook this year. With lower interest rates and continued high demand for rentals, a Buy to Let property has the potential to be a wise investment.
Working with a London property management company can help landlords ensure tenancy and a steady income source, even in times of fluctuating Buy to Let interest rates.
To speak to an expert team of property managers who can advise you on how to attract the best tenants and which areas have the best rental yields, contact J Property Management today at info@jpropertymanagement.co.uk today.
