My girlfriend is one of those unfortunates who remortgaged just before the financial melt down forced the collapse in interest rates. At the time she thought she was getting a good deal with her fixed rate at just under 5% and the certainty it afforded her. She wanted the reassurence to know just what her mortgage payments were going to be because of her potential job insecurity.
However, in hindsight that sense of security was bought at a high price. If she’d opted for a tracker rate she would have saved a small fortune.
This week the Yorkshire BS announced the cheapest five-year fixed rate ever at 3.49% for owner occupiers.Despite a high redemption cost with Santander her current mortgage company she is seriously considering swapping her mortgage to a more competitive rate.
On this basis I’d thought I’d dive back into the mortgage market and with the help of some our experts and Property Hawk Mortgages have a look at some of the best deals in the buy-to-let mortgage market.
Firstly, at the end of last week the nationalized lender Northern Rock announced that for a limited period they would be offering a £750 cashback on their buy-to-let mortgages. Definitely worth looking at if you want all the costs of a mortgage being covered. Clearly, lenders are getting keen to attract new business. Not surprising when you look at the margin they are making on lending at the current historically low interest rates.
What would I choose?
Fixing your rate a gamble but it does bring certainty and the peace of mind that your payments won’t overtake your rental income.
I still have a strong hunch that a 5 year fix is the way to go. Why?
I think that the economic news for the rest of this year is still going to be bleak making the chance of interest rate rises very small. Next year analysts are predicting the first move upwards from the current 0.5% to around 1.15%. Other interesting commentary on likely interest rate changes can be found on the Thisismoney website.
However, the so called ‘experts’ have been wrong before on rate rises and timings.
At the moment landlords and economic pundits are all looking out and all they can see is a rainy day, with loads of a black clouds as far as the eye can see. It’s not unreasonable for them to conclude it’s going to rain all day. This is England though. We know that by lunch the clouds could have lifted and the evening could be bathed in glorious sunshine!
My ‘feeling’ is that when recovery starts, it could come quickly and the government will have to respond equally rapidly to ‘normalise’ the interest rate environment and choke off inflation. Hence my preference for a long-term fixed rate of 5 years which will lock in landlords to a low rate hopefully well past the recovery and the mortgage rate rises.
Some of the best 5 year fixed rate deals available are through Property Hawk Mortgages are
for those landlords looking at avoiding those annoying lenders fees. Godiva do a 5.99% fixed to 30/06/2016 and available up to 75% LTV.
The lowest pay rate available at the moment is through the nationalized Northern Rock at 5.19%. The downside here is that it is only available up to 60% LTV and comes with a 3.5% lenders fee. The good news is that Northern Rock loans as I mentioned before now come with a £750 cashback up until the 8.8.11.
Those landlords looking to maximize their leverage and minimize the equity component of their loan should check out The Mortgage Works with an 80% LTV mortgage available up to the 30th September 2016. Again a 3.5% fee is payable.
Paul Rockett, managing director at Property Hawk Mortgages comments:
“Landlords are often keen to obtain a fixed buy-to-let mortgage over a period of 5 years, because it enables them to fix their monthly mortgage payments over the medium term and have control over their business costs.
“As the Bank of England base rate is currently at an historical low, any interest rate changes over the next couple of years will be upwards; and the relatively low cost of borrowing at the moment means that there are some reasonably attractive 5 year fixed deals available in the marketplace. So, now could be a good time for some property investors to fix.”
The start of the recovery?!
Often there is an event that sets off or symbalises the start of the recovery. These events do not themselves have a big impact on economic conditions, but they have an epoch changing effect on the collective mood.
I’m conscious that this week marks the landmark of 1 year before the London Olympics. Given the global significance of this and a time of nationalistic introspection we may all come to the view that the UK isn’t in that bad a shape and that we’ve come through worse.
Confidence and a sharp economic upturn could follow which means a series of rapid interest rate rises may only be a short way off.
It’s just a hunch, but sometimes a hunch is better than the collective views of all the experts.
What’s your strategy?