According to the latest Buy-to-let-Mortgage Costs Index from Mortgages for Business, competition is forcing lenders to offer longer term fixed rates, along with cutting their charges and fees. Healthy competition is a positive for landlords, as they now have a pool of over 700 different buy to let mortgages to compete against each other. There has been a growing supply of homes to let this year, and so a drop in rates is beneficial to landlords.
On average the effect of fees and charges on buy to let mortgages was to raise the overall cost for comparison by just 0.54% pa in quarter 3, which is significantly lower than the figure at the start of 2013 – an average of 0.67%, and down from a a figure of 0.58% of the second quarter of 2014. Charges for low and medium LTV buy to let mortgages have fallen significantly, whilst the charges for high LTV loans have increased.
Buy-to-let lending looks to total over £25 billion in 2014, and details of how lenders are responding to longer term deals looks to have a big impact on the forecast for 2015. Five year deals now make up almost one in five fixed rate mortgages, now standing at 19%, higher than the previous 15% in the second quarter of this year. Three year fixed rate deals have dropped from 19% to 17% of all products in quarter 2 of this year. Longer term fixed rates are the best option for landlords, who want to safeguard their future income, whilst minimizing any risks that are associated with rises in interest rates . Fortunately for landlords, there are now many more of these options available.
Lenders currently remain under pressure to maintain the safest possible loan books, so these changes are to be a vote of confidence in landlords at this present time. Landlords will now be needing to think about what variable mortgage rates may look like in the next two to three years; there may be a further increase in longer term fixed rate mortgage products as the demand for stability to be provided within the market grows.
Landlords can also benefit from cheap landlord insurance premiums, covering building, contents and landlord liability insurance. Discounted quotes are now available within the market, landlords need to ensure that they get the right cover from their policy, by ensuring that all of the necessary is included in the premium. Now appears to be a positive time to be a landlord within the current climate, with good rates on both premiums and longer fixed term rates.