30th
Jan 2019
Latest research from a UK mortgage broker has found that landlords prefer to opt for five year fixed rate deals.
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Their figures show that in the last three months of 2018, there was a 14% increase in landlords taking advantage of the 5 year fixed terms, rising from 70% in Q3 to 84% in Q4.
According to the mortgage broker, 97% of landlords that have arranged BTL landlords opted for fixed rates, this is mainly due to the less stringent requirements and 'testing' of applications. These products also provide landlords with a far more stable borrowing environment amidst the fluctuating economic situation.
Steve Olejnik, managing director of the mortgage broker, said: "Whilst for landlords, the preference for five year rates is both a protective measure and an opportunity to maximise borrowing, from a market perspective, it will reduce the volume of remortgaging over the next few years. Both lenders and brokers need to take this into account when projecting business growth."
In other areas of the sector, 55% of recent buy-to-let applications were from 'landlord' companies, this has risen from 44 % in Q3 2018, and it seems more people are choosing this route rather than having to take on personal loans. This choice of borrowing accounted for 51% in total of BTL lending in Q4, whereas in Q3 it was just 39%.
Over half of lenders that were studied for the research are offering companies BTL products.
Steve comments:"I expect the uptick in the use of limited companies to continue as landlords adjust their investment strategies to cope with the new tax environment and underwriting guidelines for lenders from the PRA.”
Lenders have also changed their rates for applicants with just under half of products included a percentage based arrangement fee which increased from 42% at the start of Q3 last year.
Olejnik explains further: "Loans for specialist scenarios tend to be higher and so lenders are able to claw back some of the margins they have lost through competitive pricing by applying a percentage-based fee rather than a flat fee. Almost always, there is no incentive for lenders to offer products without fees for more complex borrowing scenarios."
This was not the only increase in charges as the average flat fee rose from £1,423, twelve months ago, to £1,506.
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