Buy-to-let mortgages at cheapest level ever

Landlords are enjoying the cheapest buy-to-let mortgages ever as lenders drop rates and fees to grab a bigger share of the market.


A report in The Telegraph compared today’s lowest rate of 2.49% fixed for two years from The Mortgage Works up to 60% loan-to-value with the lowest two-year fixed rate in August 2007. This stood at 5.29% up to 75% LTV also from The Mortgage Works both with a fee of 2.5%.

Buy-to-let fees have followed the same trend with one in 10 deals now available on a fee-free basis.

Speaking to The Telegraph David Hollingworth associate director of London & Country, said: “The market for buy-to-let lending is extremely competitive and rates are the most competitive they have ever been.”

The latest figures released by the Council of Mortgage Lenders showed 43,900 buy-to-let mortgages were advanced in Q3 last year totalling £5.7m. The market has enjoyed steady growth since its low point in Q1 2010 when only 18,500 loans were advanced totalling £1.9m, with the exception of Q1 2012 and 2013 which showed a slight decline.

Specialist buy-to-let lender Paragon Group released its first quarter results last week which showed growth of 207% in buy-to-let loans, £140.2m compared to £45.6m for the same quarter the previous financial year.

John Heron, managing director of Paragon Mortgages, said: “Our landlords remain very optimistic about the rental market and have indicated that they intend to continue to grow their portfolios to meet the demands of tenants for quality rented accommodation.”

Costs of products in the medium term range have also been kept low by competition between lenders.

A report from Mortgages for Business last week revealed that the cost of a three-year fixed rate was almost the same as when swap rates bottomed out in April 2013 while five-year costs have risen by around 0.1% per annum.

This is despite a 0.75% rise in three-year swap rates and a 1% rise in five-year swaps since April last year.

But managing director David Whittaker warned the current low-rate culture would have to come to end as lenders would be unable to ignore the rising cost of funds.

He said: “So whilst lenders’ margins are likely to fall during 2014 it is highly likely that interest rates will rise on medium term fixed rate mortgages reflecting the impending rise in Bank Rate.”

Article courtesy of Mortgage Solutions

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