Buy to Let mortgage lenders are fighting each other for new customers by slashing their rates and fees, according to a Buy to Let Costs Index report from a leading independent mortgage broker. The lenders are also offering longer term fixed rates.

It reports that in the first three months of 2013, the average  fees and charges on Buy to Let mortgages increased costs by 0.67% pa, whereas in the third quarter of this year it has now significantly dropped  to 0.54% pa.

Although this trend is good news all round for aspiring landlords, it does not hide the fact that there are many different fees being offered across the board at differing loan-to-value ratios.

There has been a large reduction for charges on low LTV-up to 65% of a property value and  medium LTV - 65% to 75% Buy to Let mortgages.

Whereas high LTV - 80% + charges have risen steeply from 2013, they were roughly in line with medium LTV at 0.71% but are now standing at 0.84% at the end of September.

David Whittaker, managing director of the company, said: “Healthy competition is good news for landlords, who can now choose from a pool of in excess of 700 different buy-to-let mortgages. Meanwhile, the wider benefits of more buy-to-let funding are being felt by everyone in the private rented sector – including tenants who have seen a growing supply of homes to let this year.

“This is a vote of confidence in landlords, at a time when lenders remain under serious pressure to maintain the safest possible loan books.

“Yet the details are even more encouraging.  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.”

Nearly one fifth of fixed rate mortgages are over 5 years (19%) having risen from the second quarter of this year of 15%.

Whereas the shorter term guarantees of fixed rate over three years now account for 17%, which has dropped from 19% earlier the year.

The most common fixed rate deal is still the two year option which currently stands at 54% this has also experienced a fall, as at the end of June it stood at 57%.

Whittaker continues: “As we predicted at the start of the year, buy-to-let lending looks set to total at least £25 billion in 2014. However, as the industry starts to look ahead to 2015, the most positive signs aren’t from the headline figures – but in the detail of how lenders are responding to demand for longer-term deals,

 

“Intrinsically, all landlords tend to have a long view. Careful buy-to-let borrowers will not be thinking about the precise timing of the first rise in Bank Rate but rather what variable mortgage rates might look like in two or three years’ time. So looking ahead, we may see a further increase in longer term fixed rate mortgage products as lenders respond to an increased demand for products that provide more stability.”