Swap Rates Down: Boost For BTL Landlords

US President Donald Trump's Liberation Day tariffs are playing havoc with the markets but may have a silver lining for buy-to-let landlords.

Financial analysts are pricing in significant cuts to interest rates while forecasting rates will drop faster than central banks had planned.

Swap rates have fallen in the past few days as economists bet on the Bank of England shaving interest rates three more times this year to go into 2026 at around 3.75 percent rather than the current 4.5 percent.

How swap rates perform gives an idea of where economists expect interest rates to be in two to five years. Five-year swaps sunk from 3.97 percent to 3.63 percent. Two-year rates have slipped from 4.02 percent to 3.66 percent over the past few days.

Analysts consider that mortgage fixed rates will decrease if swap rates stay the same or keep falling.

Buy-to-let borrowing up 39%

More good news for landlords came from buy-to-let mortgage lender trade body UK Finance.

The body revealed lenders advanced 52,648 new buy-to-let loans worth £9.6 billion in the last quarter of 2024 - a massive 39 percent increase compared to the same quarter of 2023.

The average interest rate was 5.09 percent. This was 0.13 basis points lower than in the previous quarter and 0.61 basis points lower than in Q4 2023.

Landlords hold 1.43 million buy-to-let loans, a 4.4 percent increase over a year earlier, while variable rate loans fell by 15.9 percent to 518,000.

Thousands of mortgages in arrears

At the end of last year, 12,610 buy-to-let mortgages were in arrears of greater than 2.5 percent of the outstanding balance. This was down 390 from the previous quarter and 7 percent lower than in the same quarter a year previously.

Lenders repossessed 700 buy-to-let properties in Q4 2024. This is unchanged from the previous quarter but an increase of 29.6 percent from the same quarter a year previously.

The average gross buy-to-let rental yield was 7 percent, compared with 6.74 percent a year earlier.

Most buy-to-let mortgages were taken out by non-portfolio landlords (52 percent) - borrowers with three or fewer investment mortgages. Portfolio landlords accounted for 36 percent. The rest went to corporate landlords.

Lending was split between purpose-built flats (£482 million\62 percent), new builds (£226 million\19 percent) and HMOs (£166 million \14 percent)

Mortgage monitor Moneyfacts lists the current best buy landlord loan as a 3.24 percent two-year fix at 65 percent loan-to-value from The Mortgage Works (TMW). The deal comes with an arrangement fee of 3 percent of the advance. Fixed until May 331, 2027, the loan reverts to an 8.49 percent variable rate.