Time for a Tracker?

Landlords watching the news yesterday couldn’t fail to notice the headlines heralding a record breaking cut in the Bank of England base rate from 4.5% to 3%.

Those landlords who were lucky enough to be on base rate trackers will be in for a very nice surprise before Xmas as their interest and buy-to-let loan payments are slashed.

The 1.5% cut in the interest rate will mean a cut of £150 per month on every £100,000 borrowed. For landlords with a substantial portfolio, this will result in a saving on their interest bill over a year of thousands if not tens of thousands of pounds.

Should I swap to a tracker?

Many landlords since the start of the credit crunch have come to the end of a fixed period on their buy-to-let product. This means they have been moved onto the lender’s standard variable rate (SVR) and are frequently paying several percent over the base rate. These landlords may be the least likely to benefit from the large reductions in interest rates as lenders decide to increase the margin over base of their SVR thereby eating up most of the potential gain for a landlord.

The only gainers are those landlords who are on base rate trackers. In this situation a landlord is pretty much guaranteed to get the full benefit of the cut.

Property Hawk has been forecasting significant falls in interest rates now for many months and has been urging landlords to consider trackers as the best option.

Removal of products

Many mortgage companies have been busily removing their tracker products over the last few weeks in anticipation of the Bank of England rate cut. A recent search on Property Hawks buy-to-let mortgage search revealed only 10 tracker or variable rate products where as in a previous year this may have been hundreds.

Chris Horne editor of Property Hawk thoughts :

“Landlords need to contact a good broker to see what is out there. The market is so dynamic with products coming and going that landlords need to approach the situation with a pro-active attitude.”

“Generally the credit markets are starting to loosen up with 3 month LIBOR falling from 2% to 1.2% over the last few weeks. However, we are still a long way from normality with LIBOR at 0.15-0.2% above base. Until this happens rates are going to stay stubbornly high.”

“Landlords should actively hunt out the best rates and avoid high fees. The chances are that rates have further to fall and so they should resist the temptation to fix. When they find a good buy-to-let mortgage product they can’t afford to hang around as the good deals will disappear very quickly”

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