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Thursday, April 28, 2016

BTL mortgage market update

The buy-to-let mortgage market continues to offer a large number of options for landlords – Property Hawk Mortgages currently has over 900 products on its sourcing and quotation system – which cater for the wide range of different requirements from clients.

For landlords who are looking to employ higher gearing in their buy-to-let property investments there are now more lenders offering products at higher loan-to-values. Although Kent Reliance is still the only lender offering rates at 85 per cent loan-to-value, there are now at least 10 lenders in the marketplace who have 80 per cent loan-to-value mortgages in their buy-to-let range, including Aldermore, Precise Mortgages, Mortgage Trust, Fleet Mortgages, Paragon Mortgages and Godiva.

For landlords with larger deposits available, some of the cheapest rates on offer are at lower loan-to-values of 60 or 65 per cent. A good selection of these rates are at below 3.00 per cent for two years and also have no completion fee or booking fee such as with Natwest, Skipton Building Society, Virgin Money, BM Solutions and TMW. So, buy-to-let clients with greater equity in their properties can get some very competitive deals at the moment.

There is currently an excellent ‘fee-free’ product which is available up to 75 per cent loan-to-value at 3.70 per cent fixed for two years with Newcastle Building Society; and Mortgage Trust has recently launched a range of products via Property Hawk Mortgages, including a 3.60 per cent two year fixed rate up to 80 per cent loan-to-value which has no completion fee and a free valuation.

There has been some growth in the number of longer term fixed rates available in the buy-to-let mortgage market over recent months, which cater for landlords who are looking for guaranteed monthly payments over a greater period of time.

In fact, there are well over 200 five year rates currently on offer from a range of lenders including BM Solutions, Virgin Money, Godiva, Fleet Mortgages, Axis Bank and Paragon Mortgages.

There is also a ten year fixed rate available with TMW at 4.99 per cent up to 75 per cent loan-to-value with a flat completion fee of £995. At Property Hawk Mortgages, we have found longer term fixed rates to be more popular with older applicants.

Following the announcement of the buy-to-let tax changes being phased in from 2017, we are starting to see some lenders adjusting their rent stress calculations in the expectation that landlords will need to generate more revenue from their properties to meet the higher tax demands.

Typically in recent times, lender rental calculations of 125 per cent have been the norm, but we may see more lenders increasing it to, say, 135 per cent in order to satisfy their concerns over landlords’ affordability.

Rent stress tests can make a big difference to the amount that clients can actually borrow and some applicants are falling short of the higher notional rate rental calculations required by some providers. Whilst there are still lenders who have lower pay rate calculations, for example Axis Bank and Foundation Homeloans, rent stress testing is definitely a factor that should be taken into consideration when sourcing a buy-to-let mortgage.

Although buy-to-let mortgage providers may become more cautious with their rental calculations over the next 12 months, the level of lending and demand for buy-to-let mortgages is unlikely to be significantly affected overall.

To discuss your buy-to-let mortgage requirements please contact the Property Hawk Mortgages team on:
Tel; 029 2069 5446



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