The Intermediary – September 2026 - Flipbook - Page 28
BUY-TO-LET
In focus
Buy-to-let holds
up despite rate
increases
T
he buy-to-let (BTL)
market entered 2026
with clear expectations
of inflation easing.
Mortgage pricing would
be more comfortable by
the summer as a result.
That path changed, with the Bank
holding its base rate at 3.75% in June,
its fourth meeting without a cut.
Conflict in the Middle East pushed up
energy costs and altered the outlook
for inflation. Swap rates rose, followed
quickly by fixed mortgage pricing.
Pricing changed fast
The opening weeks of the year gave
landlords some grounds for optimism,
as competition among lenders brought
the cheapest BTL rates below 4%,
according to the National Residential
Landlords Association (NRLA). By the
end of March, however, Moneyfacts
reported that more than 1,300
products had been withdrawn since
the start of that month.
Moneyfacts also found that the
average 2-year fixed BTL rate rose
from 4.66% at the beginning of March
to 5.40% by 30th March. The 5-year
average moved from 5.05% to 5.72%.
A case that passed an interest
coverage ratio test earlier in the year
may now need a larger deposit.
Brokers can add value early in the
process by testing the figures before
the client seles on a property or
assumes a like-for-like remortgage
will work. The cheapest headline rate
may come with a fee that wipes out
the saving over the fixed term. Stress
rates and ownership structure can also
change how much the client is able
to borrow.
end of fixes arranged in 2021. Many
are moving from rates below 2% into
a market priced several percentage
points higher.
The conversation must begin
well before maturity. Falling onto a
lender’s standard variable rate can
add heavy costs during any period
spent waiting for pricing to improve.
Starting early gives the broker time to
assess affordability and check whether
the existing lender offers a suitable
product transfer.
Some clients will use the refinance
to release equity for another purchase,
while others may want to reduce
leverage across the portfolio. The
broker’s role is to establish what the
landlord wants the property to do over
the next few years, then structure the
borrowing around that aim.
Rental demand
Zoopla recorded an average of 5.6
enquiries for each rental home in May.
The figure is down from 15.5 at the
2022 peak, but supply remained below
pre-pandemic levels in every region.
Returns vary from one area to
another, as rental growth holds up
beer in more affordable markets
where tenants still have some room to
absorb increases. Purchase price and
achievable rent will shape the yield,
while the choice between a single let
and a more intensive specialist such as
a house in multiple occupation (HMO)
can alter the numbers again.
Clients moving into a new region
may need a lender comfortable with
their experience and property type.
HMO cases bring a different valuation
approach, with licensing and rental
assessment requiring closer aention.
Remortgaging rates
Changing client behaviour
A large part of this year’s BTL business
will come from landlords reaching the
Since the Renters’ Rights Act came
into force, landlords have had to adjust
26
The Intermediary | September 2026
MARTIN SIMS
is distribution director at Molo
to a new tenancy framework. Section
21 has ended, assured tenancies now
run on a periodic basis and rent
can only be raised once a year, with
further rules covering rent in advance
and advertised pricing.
Making Tax Digital for Income Tax
began on 6th April. Landlords with
qualifying self-employment and
property income above the threshold
now need to keep digital records and
submit quarterly updates to HMRC.
Hamptons found that 66,587 BTL
companies were formed in 2025,
taking the active total to 443,272
and showing how firmly limitedcompany ownership has entered the
mainstream. Companies now account
for an estimated 75% to 80% of new
BTL purchases.
Company ownership can affect
tax treatment and mortgage choice.
Brokers should avoid presenting
incorporation as a default answer. An
accountant needs to assess the client’s
position before the lender assesses the
application.
The opportunity
With landlords adjusting to higher
borrowing costs, coupled to new
ownership structures, BTL continues
to generate business opportunities
for brokers. Cases involving portfolio
borrowing or limited companies oen
need more work before submission,
particularly where affordability is
an issue.
Understanding the client’s rental
position and longer-term objectives
means problems can be identified
before underwriting. Early factfinding has become more valuable. ●
