Vast majority of landlords opt for five year fixed-rate deals
Monday 20 August 2018
New data from the Buy to Let Mortgage Index published by Mortgages for Business has revealed an astonishing 93 per cent of landlords opted for a fixed rate mortgage in the second quarter of 2018.
The most popular choice for landlords transacting via Mortgages for Business – a specialist buy-to-let broker – were five year fixed rates, with 69 per cent picking this route to finance buy-to-let property.
David Whittaker, chief executive of Mortgages for Business, said: “We’ve been recommending five year fixed rates for a long time.
“At the moment there is very little difference in pricing between fixed and variable rate products. In today’s uncertain economic climate, particularly the road crash Brexit negotiations, fixing makes a lot of sense, especially as the average price is just 3.52 per cent.
“Why wouldn’t landlords make them a part of their business strategy?”
According to the index, a rising number of lenders are offering products free from arrangement fees – up from 14 per cent in Q3 2017 to 20 per cent in Q2.
The amount of other incentives, including cash back, free valuations and free legal costs for landlords mortgaging property, also jumped.
By contrast, the average flat arrangement fee rose slightly in the quarter to an average of £1,389.
At less than £1,500, however, Mortgages for Business believes this still represents reasonable value.
The index also revealed that the number of lenders offering products to landlords borrowing via limited companies grew by three (The Mortgage Works, Kensington Mortgages and LendInvest) in the second quarter of this year.
In addition, half of all buy-to-let lenders now offer mortgages to corporates.
Going incorporated is not always the right choice, according to Simple Landlords’ guest blogger Tony Gimple, of Less Tax for Landlords. According to Tony’s latest blog for us, incorporation isn’t necessarily the Holy Grail… Another route could be to go for a hybrid model.
On an overall basis, pricing stayed fairly flat in Q2 despite a rise in swap rates, suggesting that lenders are continuing to absorb costs in order to remain competitive.
While mortgaging continues to surpass purchases, there were still more buy-to-let purchase transactions by landlords using limited companies.
Lastly, the index revealed that HMOs are producing the highest gross annual yields (at 8.6 per cent). Why not watch Carl Agar’s video on how to stop a HMO crashing and burning… If this is a strategy that you are in or want to explore, it’s well worth a watch.
Also for you investment savvy landlords, there is a new trend for converting HMO’s back into single-let properties, Could this open the door to a new business strategy for you?
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