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Cost of buy-to-let mortgages falls - despite new lending rules and interest rate fears

Thursday 16 November 2017

The cost of buy-to-let mortgages has been unaffected by recent changes brought in by the Prudential Regulation Authority and months of rate rise predictions, and in some cases has fallen, new data shows.

Despite the introduction of tougher lending criteria, and uncertainty over this month’s eventual increase in interest rates, a number of buy-to-let mortgages are down in cost since August – some for the second successive quarter, according to Mortgage Brain.

Mark Lofthouse, CEO of Mortgage Brain, said: “With interest rates rising for the first time in just over 10 years, and further increases predicted, this could be one of the last times that our analysis reports reductions in the cost of mainstream buy-to-let mortgages.

“While our three, six and 12 month analysis all show potential cost savings for buy-to-let investors, we’re already starting to see ripples across the market following this month’s rate rise.

"Our most recent monthly data, for example, shows signs of a number of cost increases when compared to last month and it will be interesting to see how this develops in the coming months.”

With a current rate of 1.54 per cent and 1.89 per cent respectively, the cost of a 60 per cent and 70 per cent Loan To Value (LTV) two year buy-to-let tracker mortgage, is now two per cent lower than it was three months ago.

Meanwhile, the cost of a two year fixed BTL mortgage with a 60 per cent LTV (at 2.08 per cent) is now one per cent lower than it was at the beginning of August.

And its 70 per cent and 80 per cent LTV counterparts remain stable with no movement in cost being recorded over the same period.

A similar trend can be seen in the cost of longer term products with Mortgage Brain’s latest data showing a two per cent drop in the cost of a 70 per cent LTV three and five year fixed BTL mortgage, while the cost of a 60 per cent LTV three and five year fixed, and an 80 per cent LTV three year fixed, all remain unchanged when compared to August 2017.

The only 'sting in the tail' comes in the form of a five year fixed buy-to-let mortgage, which, with a current rate of 4.09 per cent, now costs 2 per cent more than it did three months ago and 1 per cent more than it did at the beginning of October.

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