Understanding the current state of play and imminent outlook of buy-to-let mortgage rates in the UK is vital. For property and financial experts nationwide, it’s important to equip yourself with the relevant knowledge following Chancellor Rachel Reeves’ Autumn Budget 2025, particularly as landlords and investors approach you with questions about investing in a buy-to-let property in 2026.

With the Autumn Budget now delivered, we have concrete clarity on some of the fiscal policy changes that will affect the value and return potential of property investments. Current market insights and indicators, as well as confirmed budgetary measures, prove invaluable, particularly for solicitors guiding clients through the conveyancing process.

With that in mind, it’s prudent to break down the key factors at play and what 2026 looks like as far as buy-to-let mortgage interest rates are concerned.

The current state of play with buy to let mortgages

The mortgage market has demonstrated modest but meaningful improvement in recent months.

According to Moneyfacts data, the average five-year fixed rate has decreased from 5.39% in August 2024 to 5.01% by August 2025, with similar drops in five-year SWAP rates across the same period. While these reductions may seem minimal, the long-term impact across a mortgage borrowing term can be substantial. Investors may be able to save thousands of pounds over their borrowing amounts.

Property experts can leverage this into setting more optimistic and achievable expectations for your prospects. For example, landlords who have, until now, postponed expanding their portfolio, or refinanced during a period when rates were higher, may now be reconsidering their financial positions. This may kickstart renewed transaction activity.

This does pose an evergreen question: will interest rates continue their downward trajectory through 2026?

Bank of England policy and inflation projections

The Bank of England faces a challenging balancing act.

Having reduced rates five times since August 2024, the Monetary Policy Committee (MPC) remains deeply divided on the pace of further cuts. Inflation (at this time of writing) stands at 3.8%, which is still dramatically above the UK government’s target of 2%. The Office for Budget Responsibility (OBR) now predicts inflation will average 3.5% this year before falling to 2.5% next year, with a return to the government’s 2% target expected in 2027.

Many market analysts anticipate that the Bank Rate could see up to 100 basis points of cuts throughout 2026, provided fiscal discipline holds following the Autumn Budget. However, this remains an optimistic outlook, as it assumes inflation follows its predicted trend, and that external economic and geopolitical factors remain stable. Naturally, that is incredibly challenging to predict.

For mortgage and lending experts, it’s prudent to advise clients that while the direction of travel appears favourable, the timing and severity of rate reductions cannot be easily confirmed.

Realistic expectations for 2026 buy-to-let rates

In the world of property, timing can be an important consideration. As independent mortgage advisers rightly highlight, a mortgage should be recognised as a significant long term commitment undertaken in our lifetimes. For this reason, investors and landlords are encouraged to consider their options carefully and ensure they understand the potential risks as well as the potential benefits before making any decisions.

Future buy-to-let mortgage rates remain inherently uncertain. While some industry commentary suggests that the average five-year fixed rate might move towards around 4.5% by the end of 2026, this should be viewed only as a broad market indication rather than a prediction. Actual rates will depend on economic conditions, lender pricing, product features and associated costs such as arrangement fees and valuation charges.

Because buy-to-let products can vary significantly, prospective borrowers should seek information or advice tailored to their personal financial circumstances and long-term objectives.

What the Autumn Budget means for landlords

Rachel Reeves’ half-yearly Budget has introduced several measures that will directly impact landlords and buy-to-let investors.

Basic and higher income tax rates on property, savings, and dividend income will increase by 2 percentage points. This, coupled with existing mortgage interest relief, erodes net yields and may prompt some investors to adjust their portfolios.
National Insurance and income tax thresholds have been frozen for another three years, until 2031. This fiscal drag means more landlords can expect to be pulled into higher tax bands over time.
Properties in England worth more than £2 million will face a council tax surcharge of between £2,500 and £7,500 following a revaluation of homes in bands F, G and H. Landlords with premium properties may need preparation to factor additional costs into their budgeting.
The OBR has upgraded economic growth predictions to 1.5% this year (up 0.5% from March’s predictions), which may initiate activity in the rental sector, driving demand and improving property values, which may come as a reprieve to the tax hikes.

The salient point is that property professionals should expect increased activity from clients reassessing their strategies in light of these changes.

What else could disrupt interest rate forecasts?

Beyond the Budget, several factors could materially impact mortgage rate trajectories:

Ongoing geopolitical and international tensions could spell a seismic economic shift in any affected jurisdictions. These can influence inflation forecasts and central bank policy responses.
GDP growth rates, while improved, are slow, and coupled with unemployment rising, this could accelerate rate cuts if the economy shows vulnerability.
While rates may decrease modestly next year, the difference may not be enough to justify a delayed transaction (especially considering rising rental yields that could offset borrowing costs).
The Renters’ Rights Bill will fundamentally reshape buy-to-let mortgages in 2026. Those contemplating expanding portfolios will no doubt need to consider this regulatory change alongside new tax implications.

Buy-to-let lender appetite

Contrary to assumptions that higher interest rates dampen lender enthusiasm, the buy-to-let sector has witnessed increased competition and product innovation. Lenders have adapted policies to be more inclusive, streamlined application processes, and enhanced service levels despite the challenges that investors are facing.

Particularly noteworthy is the evolution of Limited Company buy-to-let offerings. Historically commanding premiums of 1-2% above personal name mortgages, Limited Company rates now show minimal pricing differentials. Analysis reveals that 5,312 new Limited Companies were established for buy-to-let purposes in September alone, which equates to 28% more than any previous September on record.

Given the increased tax burden on personally held properties announced in the Budget, we may see this trend towards Limited Company ownership accelerate further as landlords look to optimise their tax position.

The mortgage rate environment heading into 2026 offers cautious grounds for optimism, with gradual reductions likely. However, the Autumn Budget has fundamentally altered the profitability equation for landlords through increased taxation on rental income.

For conveyancing and property professionals, the key message for clients reconsidering their portfolio structure, is that while waiting for lower rates may seem prudent, the immediate impact of tax changes and the opportunities available now could outweigh the modest savings on interest rates.

The coming months will provide greater clarity on how landlords respond to these fiscal changes, but it’s safe to say that 2026 will present viable opportunities for landlords prepared to navigate the evolving and as-always-unpredictable property market, albeit with more tax challenges afoot.

Disclaimer: This article is for general information only and does not constitute personalised advice or a recommendation. Mortgage rates are subject to change at any time, and figures quoted are not guaranteed. Always seek regulated financial advice before making mortgage or investment decisions

Kindly shared by Annie Button Image courtesy of Adobe