LANDLORDS FIX IT
Landlords that have been contemplating changing their buy-to-let mortgage will probably need to re-assess their strategy in the light of the latest information emerging from a raft of financial analysts.
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Base rate falling no longer a ‘banker’
The view in the financial press has shifted in recent weeks from a strong consensus that interest rates were heading rapidly downwards to an opinion that a cut in interest rates is no longer a sure bet. This is because the spectre of inflation currently running at 3% and a full 1% above the Governments 2% target seems to have raised its ugly head. A trip down the supermarket isle will be enough for most landlords to appreciate that inflationary pressure is all around, despite a rapidly slowing housing market. At the beginning of the year many pundits were expecting a base rate of possibly as low as 4% by the end of the year. The Financial Times at the weekend reported that “borrowers should brace themselves for yet more increases to mortgage rates as the latest jump in inflation and a bleak economic picture renew the pressure on lenders”.
Mortgage broker’s outlook
Buy-to-let mortgage brokers had hoped new borrowing costs would begin to edge down over the next few months on the back of the further cuts to the base interest rate. But following the higher than expected inflation figures revealed last week, the chance of another rate cut this year, or even next, is considered far less likely.
Swap rates which determine the cost of short-term fixed rate lending has shot up as a result, prompting mortgage brokers to warn that increases to fixed mortgage rates will be hard to avoid.
Many landlords have opted for tracker buy-to-let mortgages on the basis that these rates would come down, will now have to meet high mortgage costs for longer than expected. According to the Financial Times brokers are now advising most clients to choose fixed rates and to lock into a new deal as soon as possible.
Two year swap rates had eased in previous weeks, giving BTL mortgage lenders – such as Nationwide and Abbey room to cut some of their fixed buy-to-let mortgage rates. With swap rates now back at levels not seen for six months hopes have dwindled that more buy-to-let lenders will cut their fixed rates. Mortgage brokers fear that most competitive fixed-rate deals will disappear swiftly.
“Nationwide made its reductions on falling swap rates and the expectation that base rates would fall further.” Said Melanie Bien, director at Savills Private Finance, the broker. “Now the base rate looks unlikely to fall”.
Best Fixed Rates
By carrying out a quick search using Property Hawks unique BTL mortgage search facility powered by Moneynet, we have found that the best fixed rate buy-to-let mortgage is provided by The Mortgage Works. This buy-to-let product has a pay rate of 6.09% or 6.4% APR and is fixed until 2023 with no upfront fee payable. It is possible to find fixed rate buy-to-let mortgages with a shorter tie in period to allow a landlord to swap to a tracker or variable rate in a couple of years after the current turbulence in the credit market subsides and after which inflation is likely to have fallen. Mortgages for Business is offering a 6.14% 3 & 5 year fixed rate buy-to-let mortgage. Both these rates are only available for lenders looking for a 75% Loan To Value (LTV). For landlords looking at a higher LTV of say 85% then they could do worse than popping down to their local Post Office or visiting their website to look at the details of their 6.39% 3 year fixed rate with a £599 application fee.
Search independently for best deals
Landlords looking for a new buy-to-let mortgage should be aware of the latest news featured on BBC Radio 4 Moneybox last Saturday. In this programme it was reported that increasingly the best mortgage deals are only available direct from the buy-to-let lender. In a recent survey conducted by Moneyfacts – the rates comparison site indicated that out of the top 20 two year fixed rate products 17 of these were only available direct from the lender. This means that landlords should ensure that they carry out a comprehensive search of the buy-to-let mortgage market first even if they eventually plump for the convenience of using a buy-to-let mortgage broker who may nevertheless provide some attractive exclusive rates themselves.