Landlords are benefiting from a spate of mortgage rate cuts, with brokers suggesting now could be a good time to lock in a new deal.
This week, HSBC cut its market-leading buy-to-let mortgage rates even further.
The bank lowered deals by up to 0.25 percentage points, leaving landlords buying or remortgaging in their own name with some tantalising options.
Its lowest buy-to-let rate for someone remortgaging at 60 per cent loan-to-value is now 3.74 per cent with a £3,999 fee.
The two-year fixed rate deal would mean a landlord remortgaging a £200,000 loan on an interest-only basis could expect to now pay £635 per month, with the fee added to the mortgage.
This is a far cry from the average buy-to-let rates being cited by rates scrutineer, Moneyfacts.
Shake on it: One broker says now could be a good time for landlords to fix their mortgage deal
It says the average five-year fixed buy-to-let mortgage charges 5.29 per cent while the typical two-year fix charges 4.99 per cent.
Someone with a £200,000 interest-only mortgage on the average rate could expect to pay £832 on a two-year fix and £882 on a five-year fix.
HSBC is also offering buy-to-let purchase rates as low as 3.84 per cent on a five-year fix, if the investor has a 40 per cent deposit and can stomach a £3,999 fee.
Those wishing to buy with a 25 per cent deposit can secure a rate of 3.94 per cent with HSBC, again with a £3,999 fee.
HSBC is offering lower fee options which may work out cheaper depending on the mortgage amount required. You can work out the true cost of rates and fees using This is Money’s mortgage calculator.
Another lender to cut rates recently is NatWest.
It is now offering a 4.1 per cent rate with a £995 fee for landlords buying with a 40 per cent deposit.
For those buying with a 25 per cent deposit, it is offering 4.33 per cent with a £995 fee.
Aaron Strutt, of mortgage broker of Trinity Financial, said: ‘Mortgage lenders have been busy lowering their buy-to-let rates for quite a while now as they try to tempt landlords to take their deals.
‘There are lots of high fee and low rate products designed to help landlords either get sufficiently large mortgages, or ease their cashflow when they remortgage.
‘We are still arranging a fair few buy to let mortgages, often for landlords buying in the north of England or through a limited company.
‘There are a lot of remortgages coming up as well and landlords are clearly keen to get the cheapest possible rates.
‘This often means they switch to a new lender because there is so much competition in the market.’
Low rate, high fee mortgages gain popularity
The Mortgage Works (TMW), which is the buy-to-let lending arm of Nationwide Building Society, also lowered its buy-to-let rates last week.
It is now offering a 2.79 per cent two-year fix with a fee equal to 3 per cent of the loan, for those buying with a 35 per cent deposit.
On a £200,000 interest-only mortgage that would work out at £468 a month with a £6,000 fee. Adding the fee to the mortgage would equate to £480 a month.
‘This is a great product for landlords needing to remortgage and avoid a repayment shock, even though it has a chunky fee,’ said Strutt.
‘One of our clients just took a similar low-rate and high-fee buy-to-let deal because she had equity in her buy-to-let property and used the rent to supplement her income.
‘This product isn’t for everyone, and the fee is high, but the headline rate is ridiculously low, which certainly helps many landlords who want to maintain their cash flow.
‘The rate is equivalent to 4.29 per cent with the fees included.’
This low fee and high rate combination appears to be becoming more widespread.
One lender, Capital Home Loans, has a 2.35 per cent fixed rate deal with a 7 per cent fee.
But most lenders offer the choice between a ‘high fee and low rate’ or a ‘no fee and higher rate’ alternative.
For example, buy-to-let lender BM Solutions has a 4.32 per cent two-year fixed rate with no fees at 50 per cent loan-to-value and a 2.93 per cent buy-to-let rate at 50 per cent loan-to-value with a 3 per cent product fee.
‘Lenders have been constantly lowering their buy-to-let rates to try and attract landlords and we are now at the stage where rates are often cheaper than the residential rates,’ added Strutt.
‘Historically, buy-to-let rates have always been higher than the residential deals, but these sub-3 per cent products show how keen the lenders are to issue more mortgages to landlords.
‘Many of the high fee and low rate buy-to-let mortgages have been designed to help landlords access larger loans.
‘In many cases rental properties do not generate enough rent for landlords to access the loan sizes they need to buy or remortgage, especially when capital raising.’
