Friday 4th May 2018
The pricing of five-year fixed rate buy-to-let mortgage products continued to fall in the first quarter of the year, according to the latest Buy to Let Mortgage Index published by Mortgages for Business.
There was a surprising drop in costs despite a steady increase in five-year swaps, suggesting that mortgage lenders chose to reduce their margins to remain competitive.
The findings from the index also reveals that the costs were absorbed across low, medium and high loan-to-value products, making five-year fixes even more attractive to landlords looking to lock-in to low interest rates.
Knowing exactly how much monthly mortgage is going to be for the next five years, no matter what happens to the Bank of England base rate, will certainly appeal to many buy-to-let landlords, especially during times of political and economic uncertainty, caused in part by Brexit.
Over the quarter, the average pricing of rates available to landlords borrowing via limited companies also fell except on five-year fixed rates which increased by 10bps from 4.2% to 4.3%.
Although the number of lenders offering products to corporates remained unchanged at 16, the total number of products available increased by 1%, lifting availability to 25% of the entire market.
The index also found that number of lender arrangement fee-free buy to let mortgages grew for the fourth consecutive quarter.
Almost one fifth - 19% - of all products had no lender arrangement fee in Q1, up from just 11% in Q2 2017.
Some 39% of products have flat fees charged at an average of £1,441.
On the remaining products, lenders charge an arrangement fee based on a percentage of the loan amount, typically 0.5-3%.
David Whittaker, chief executive officer at Mortgages for Business, said: “Change has been the only constant in the buy to let market in recent years so we felt it was time to take a more holistic approach to tracking and analysing industry developments. This new Buy to Let Mortgage Index combines and replaces four previous indices plus our commentary on the money markets.
“Whilst the current picture shows that lenders and landlords have much to accommodate, the data reveals that slowly, both are moving towards solutions which should keep buy to let a popular if less prolific investment in the years to come.”
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