MORTGAGE REVIEW – JUNE 2007
Welcome to Property Hawks NEW feature; that of our regular mortgage review. Each month we scour the internet looking for the best deals available across the Buy– to–let market.
We look at fees, costs, ‘Lock ins’. Our aim; to keep you up to date with the best deals available. The information contained below is impartial. We receive no commission as a result of mentioning any of the products. Our focus is simply to deliver clear and simple information to enable you to best manage your buy-to-let finances.
If you know of any better rates, let us know. With interest rates rising, I’m sure your fellow landlords will appreciate it.
With the interest rate still rising borrowers are still attracted to fixed rate mortgages as a way of protecting themselves against further rises. This type of product is particularly suitable for landlords who are heavily geared and therefore are in danger of their investment moving from revenue positive to having to subsidise a shortfall out of other income.
The best rate currently available is the 4.89% headline rate available from the Mortgage Works. On a £100,000 mortgage this equates to a monthly payment of £408 and the arrangement fee is 0.5% of the loan, although there is a minimum charge of £595 for the period up to 30/09/09. It is worth noting that this mortgage is not available for new properties (they must be at least 1 year old). Mortgage Works products are only available through intermediaries.
Alternatively, if you don’t like the idea of paying a large upfront fee then again the Mortgage Works offers the best no fee rate at 5.84%. This product is fixed until 30/09/10 with a monthly mortgage payment of £487, a whole year longer than the one quoted above.
Both rates allow a maximum of 85% loan to value. The downside is that there is a ‘lock in’ with both products of 3 and 2 years respectively.
The best rate for a 90% loan is available from Capital Home Loans with a rate of 4.99% with equates to £416 per month on a £100,000 mortgage.
However, whilst a fixed interest rate deliver certainty, its worth remembering that while most experts predict more rises this year to possibly as high as 6% by the year end. This may represent the peak, with many experts predicting that rates will start to fall shortly after.
The best variable deals currently are those offered by Coventry Building Society. The company is offering a rate of 6.04% in return the applicant is required to pay a £999 arrangement fee although valuation costs are paid for up to a maximum charge of £649. These costs relate to an application made through an intermediary, however Property Hawk advices you to go direct, this way the arrangement fee is only £749 payable on completion. The Coventry does offer an even lower rate of 5.9% for those who only want a maximum of 65% LTV. A couple of provisos relating to the Coventry products is that monthly rental must cover mortgage interest by 130% and also these products are not suitable for large portfolio holders as a maximum of 5 rental properties is allowed.
Trackers are those mortgages which follow the general interest rate. The interest rate refers to; the Bank of England base rate or LIBOR (London Inter Bank Offer Rate). They normally have a limited time span, although lifetime trackers do exist (see Property Hawk mortgages). The market leading rates are currently being offered by BM Solutions with a rate of 5.14%. This product is accompanied by a charge of £1500 with the rate tracking the Base Rate for 2 years. For those keen to keep charges to a minimum Mortgage Express offers for an initial fee of £599 a 3 year product at 5.54% equating to a payment of £462 per month on a £100k mortgage. Those landlords who want to avoid all arrangement costs might be interested in the product being offered by Bristol and West with a rate 0.29% above base at 5.79%. This product continues until 31.08.09 and has no fee. The initial monthly payment is £483 but the product is not available to first time buyers.
PROPERTY HAWK WARNING!
Always remember before you look to swap to a new mortgage provider that you check with your existing company as to what are the best rates that they can provide. Many lenders have exclusive rates available to existing borrowers and will swap you to these new rates without you having to pay for an expensive valuation and survey. This is one thing that a mortgage broker won’t tell you as they are keen to get you to swap your product. This is after all how they make money.