What 6% mortgage rates do to a buy-to-let deal

The average five-year fixed rate on the market reached 6.00% on Monday 5 October, up from 5.98% the Friday before. That marks its highest point since September 2023. The two-year average sits at 5.98%, its highest since December 2023. Cheap money vanished in a month. Lenders offered 1,494 fixed deals below 5% at the start of September and nine by 5 October.

The Bank of England did nothing to cause it. The base rate has not moved since December last year, but bond market volatility drove up the swap rates lenders use to price fixes. For a landlord the monthly payment tells only half the story. Lenders size the loan on rent cover, and a rate rise hits that test twice.

How fast the market moved

Buy-to-let pricing turned in spring. The average two-year fixed buy-to-let rate jumped from 4.66% to 5.44% between 1 March and 1 April 2026. The five-year average climbed from 5.05% to 5.75% over the same weeks. Moneyfacts tied the move to the Middle East conflict and its effect on UK inflation forecasts.

September made it worse. Barclays raised selected fixed rates four times, while HSBC, Lloyds, Nationwide, NatWest, Santander and TSB each made three rounds of increases. Buy-to-let desks still move both ways. Santander cut its 75% LTV two-year purchase rate to 4.99% on 2 October, while NatWest raised its equivalent from 4.61% to 4.91%.

Prices give no cushion either. Nationwide reported annual house price growth of 0.8% in September, the weakest since December 2025. A thin deal will not grow its way out of a higher rate.

The stress test now sets your deposit

Lenders check that rent covers interest by a set margin, called the interest coverage ratio. A basic-rate landlord borrowing in their own name typically needs 125%. A higher-rate taxpayer needs 145%. The term of the fix decides which rate goes into that test. Many lenders, Landbay and Hodge among them, test a five-year fix at the pay rate and stress a two-year fix at 5.5% or the pay rate plus two points, whichever runs higher.

Take a £200,000 two-bedroom house renting for £1,100 a month. That brings £13,200 a year, a 6.6% gross yield. On a five-year fix at 6.0%, a basic-rate landlord could support a £176,000 loan on rent cover alone, so the 75% LTV cap of £150,000 binds first. A higher-rate landlord supports £151,700, still enough for the full £150,000.

The two-year fix tells a different story. At a 5.5% pay rate, the lender stresses at 7.5%. The basic-rate landlord now borrows up to £140,800. The higher-rate landlord gets £121,400 and needs a £78,600 deposit instead of £50,000. Back in March, at a 4.66% average, the same stress test allowed £136,700. Six months of repricing cut that landlord's maximum loan by £15,300.

What the payment does to cash flow

Now run the five-year fix at 6.0% on a £150,000 interest-only loan. Interest costs £9,000 a year. We assume 12% letting and management fees, £1,584, plus £1,800 for insurance, repairs and voids. That leaves £816 before tax, or £68 a month. At March's 5.05% five-year average, the same house cleared £2,241.

Tax takes the rest. Since Section 24, a landlord in their own name pays tax on profit before interest and claims only a 20% credit on the interest. A higher-rate landlord owes 40% on £9,816, which comes to £3,926, minus a £1,800 credit. The £2,126 bill turns £816 of profit into a £1,310 annual loss.

A limited company pays corporation tax on the £816 after interest. At the 19% small profits rate, it keeps £661. The structure decides whether this deal makes money at all.

The remortgage wave

Most of the market's activity now comes from landlords refinancing. Remortgage deals rose 11.1% year on year to just over 39,000 in the period Moneyfacts tracked, while purchase loans fell 14.9% to about 16,800. UK Finance counted 58,272 new buy-to-let mortgages in the first quarter of 2026, up 3.3% on a year earlier.

Many of those landlords fixed when money cost far less. Moneyfacts put the average residential rate at 2.55% in October 2021. On a £150,000 interest-only loan, that rate cost £3,825 a year. At 6.0% the same loan costs £9,000. Portfolio landlords should test each property as a seperate case because one weak house can drag the whole portfolio under a lender's cover rules.

Underwriting buy-to-let in October 2026

A few rules follow from the numbers. Model every deal at 6% or the live quote, whichever runs higher. Run the stress test before you agree a price, because it now sets the deposit. Compare five-year and two-year fixes on maximum loan as well as rate, since pay-rate testing on five-year deals lets you borrow more. Count arrangement fees as cost: best-buy two-year deals start around 3.1%, with a large percentage-based fee attached. And hold capital growth at Nationwide's 0.8%.

Run the tax line before you run the yield. On today's rates, a 6.6% gross yield clears a small profit in a company and a loss in a higher-rate taxpayer's own name. Torquity models every deal at live mortgage rates, shows DSCR and cash-on-cash alongside the gross yield, and ranks whole markets on what survives the stress test. The deals that still work at 6% will still work when rates fall. The ones that need cheaper money to break even will sit on the market until it arrives.