21st
Feb 2022
PRS landlords are being protected from the major effects caused by interest rate rises as lenders are clamouring to keep hold of their clients and encourage new clients, according to an online mortgage broker.
The broker says that the Bank of England’s two base rate increases ( from December’s 0.1 per cent rise to 0.25 per cent and February’s 0.25 per cent up to 0.5 per cent) have fed through to landlords on Standard Variable Rate mortgages; however there are changes afoot for those who wish to apply for two to five year fixed mortgages.
The mortgage broker specialist says a standard SVR mortgage’s rate is 4.84 per cent which increased from December by 0.1 per cent making the monthly cost increase by £12 – from £583 to £605 for a typical landlord mortgage of £160,000 with an LTV (Loan to Value) of 60 per cent.
The lowest priced typical BTL mortgage is a 2-year fixed rate mortgage for £160,000 with an LTV of 60 per cent, and has minimally increased from 1.69 per cent to 1.76 per cent, taking the monthly cost from £262 to £271 including fees.
The broker also points out that there are other two-year fixed rates with minor increases and for five year BTL fixed rate mortgages there is hardly any movement at all.
The company says lenders are fiercely cutthroat when it comes to BTL mortgages because there are so many five year mortgages as many landlords have taken out to counter the avalanche of legislation heaped onto the sector, with many having to be renewed this year.
The best value typical five-year fixed rate buy-to-let mortgage is at 1.98 per cent, which is £278 per month including fees.
The broker’s chief executive, says: “Lenders were quicker to pass on to customers with Standard Variable Rate mortgages February’s base rate increase than they were in December. However, it is a different picture when it comes to fixed rate mortgages, especially the more popular five-year fixed rates.
“Lenders knew there would be high demand for five-year re-mortgages and may well have set aside a war chest to serve demand. They are competing hard for business and that has to some extent insulated landlords using this type of mortgage from a sharp increase in costs.”
However he does warn: “We cannot really expect this situation to persist as the Bank of England base rate continues to move upwards as most commentators expect it to do so. The Monetary Policy Committee meets again on March 17 and with inflation where it is now, we should brace ourselves for another rate rise, especially as there are no more Monetary Policy Committee meetings planned until May.”
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