According to the Buy-to-Let Mortgage Costs Index form Mortgages for Business, competition is forcing buy-to-let lenders to lower their charges and fees, and also offer longer-term fixed rates. Thanks to the huge number of products now on the market, lenders are having to sweeten their offers in order to tempt landlords.
On average the effect of fees and charges on buy-to-let mortgages was to raise the overall cost for comparison by just 0.54% pa in Q3 2014, significantly lower than the average of 0.64% extra in fees and charges from a years earlier.
But there is an even bigger difference between fees for buy-to-let borrowers at different loan-to-value ratios. Charges for high LTV (80% +) have always been greater than for medium (65-75%) and low LTV (up to 65%), but the difference between high and low in Q1 2013 was just 0.9%. By Q3 2014, it had grown to 0.43%. The difference between medium and high has also widened dramatically, from 0.1% to 0.28% in the same period.
David Whittaker, managing director of Mortgages for Business, said, “Prioritising middle and lower LTVs is prudent – but the most encouraging signs are lenders offering landlords what they need. Longer-term fixed rates are the best option for landlords looking to protect their future income and minimise any risk associated with interest rate rises, and there are now many more of these options available.”