UK investment mortgage rates


There are no restrictions on foreigners getting mortgages to buy a property in the UK, but the system for such mortgages can be complicated. In this guide, we explain investment mortgage rates, including affordability considerations, rates and taxes.

The UK has one of the biggest mortgage markets, which includes 11.1 million mortgages worth nearly £1.3 trillion. Although homeownership has declined among younger age groups in recent years, buying a home in the UK and getting a mortgage remains something that many young families plan for. There are various types of mortgages and investment mortgage rates in the UK which are available through banks and building societies.

There has been uncertainty across the UK housing market since the EU referendum in 2016. Brexit has implications for the UK housing market; but it’s difficult to say anything with much certainty at this stage. House prices across the UK dropped in the year after the Brexit referendum, except for in Scotland. The average house price across the UK has remained fairly high at around £228,000.

If you are moving to the UK and wondering whether to buy or rent a home, there are advantages and disadvantages for each. Your decision depends on your own personal preferences and circumstances. Renting offers greater flexibility but less stability as renting costs can be high, especially in larger cities, but is often a more viable move in the early period before you have decided where you want to settle.

Who can get a mortgage in the UK?

There are no legal restrictions on any adults getting a mortgage in the UK. Foreigners can take out mortgages in the UK whether resident or non-resident, although exact terms for investment mortgage rates will depend on individual lenders. Each bank or building society will have their own set of requirements, but in general the main factors that are taken into consideration are outlined below.

Age: as mortgages are essentially home loans that are paid off over a long period, it’s more difficult for older people to take out a mortgage in the UK. Though most banks and building societies won’t outright refuse older applicants, they will probably ask for a bigger initial deposit and reduce the amount of time given to repay the mortgage.

Income and job security: lenders need to be confident that mortgage payments will be met and will calculate the risks accordingly when offering mortgages. This could be a disadvantage for self-employed workers and freelancers in the UK. You will need to show proof of earnings in order to secure a mortgagee. Moreover, the amount you can borrow depends on the amount the mortgage lender feels you can pay back.

Credit score: as with loans and other forms of credit in the UK, your credit history will be checked to determine whether you are eligible for a mortgage. If you have bad credit or a low credit score, lenders may be reluctant to grant you a mortgage. In such a scenario, the best thing you can do is to spend a few months trying to boost your score (e.g. paying off any outstanding debts, making sure you’re listed on the electoral register).

Investment mortgage rates UK for other purposes

Mortgages in the UK are also available for purposes other than buying the home you intend to live in, including the following scenarios.

You want to buy a second home or holiday home. You can take out a second mortgage using your existing home as security. You can use the equity (the value amount of the existing property that you have paid off) against a new loan. For example, if your home is worth £250,000 and you have £150,000 left to pay on your mortgage, you have £100,000 in equity which you can borrow for a second mortgage. Second mortgages are sometimes used by homeowners to raise capital for purposes other than buying a second home, such as home renovation.

You want to buy a property to rent out. You can take out a BTL mortgage which allows you to buy the property as an investment without needing to provide the full amount to buy it outright. You can then cover the mortgage and other associated costs through rental payments which you receive from tenants. Many BTL mortgages are interest only, which means you only pay off the interest. You then pay off any outstanding balance at the end of the mortgage (e.g. 25 years), sometimes by selling the property. Although, repayment buy-to-let mortgages are also available, they are more expensive; thus, higher rents need to be charged.

If you’re looking to acquire a business property. You can take out a commercial mortgage if you want to buy for the purpose of business in the UK. Commercial investment mortgage rates are very similar to domestic mortgages in the UK. You’ll usually need to provide a deposit of around 25%.

Investment mortgage rates in the UK

The UK property market slowed down somewhat over the last year, amid uncertainty around Brexit. Despite this, property prices are still just about on the rise. In January 2019, average house prices rose by 0.1%, to reach £211,966.

In general, investment mortgage rates in the UK have come down during the last 5 years. As of March 2019, the average interest rates for a UK mortgage were 1.68% (two-year fixed-rate), 2% (three-year fixed-rate), 2.04% (five-year fixed-rate), 2.58% (10-year fixed-rate), and 1.6% (two-year variable). The cheapest deals are generally available to buyers with a deposit of at least 40%. However, it’s possible to secure a fixed-rate mortgage of below 2% on a loan of up to 90% of the value of a property.

Although 100% mortgages don’t currently exist in the UK, there are some no-deposit products that require a parent or family member to act as a guarantor.

If you’re considering investing in a buy-to-let (BTL) property, you’ll find mortgage rates of around 3–3.5%. You’ll need to familiarise yourself with the various taxation rules around property investment, including the 3% stamp duty surcharge. Generally speaking, buy-to-let mortgages involve more stringent affordability testing; as such, you may need a bigger deposit than if you were buying an owner-occupier property.

Disclaimer: The opinions expressed by our writers are their own and do not represent the views of Getting Money Wise. The information provided on Getting Money Wise is intended for informational purposes only. Getting Money Wise is not liable for any financial losses incurred. Conduct your own research by contacting financial experts before making any investment decisions.

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