Lenders offering better deals for Landlords

It’s no secret that over the past few years the private rental market has boomed, which means that good quality, affordable properties are now usually only on the market for a matter of days before they are let out. Furthermore, landlords have been benefitting from a secure form of income, as the rising demand has led to rent prices increasing and tenants taking more care of their properties than in previous times.

This is why a number of lenders have recently created special offers for landlords, such as record breaking low interest rates. So far, the best two year fixed rate for a buy to let mortgage is a tiny 2.9 per cent – two points lower than in August 2007 just before the recession began. The reason why lenders are offering such great deals is that they see buy-to-let mortgages as extremely secure compared to private mortgages, and with the huge amount of people now renting in the UK it looks set to remain this way for years to come.

Landlords are also benefitting from the fact that most lenders are now asking for smaller deposits for buy to let mortgages, and one in ten mortgages are even available without arrangement fees. David Hollingworth, a broker at London & Country, said: “The market for buy-to-let lending is extremely competitive and rates are the most competitive they have ever been. Bank Rate is still at a record low at 0.5pc and lenders want to attract new business, so they’re all pushing their rates down, even for borrowers with less equity in their portfolio.”

Keystone Buy to Let Mortgages is just one company that is offering new lending options to landlords, such as their new ‘classic’ and ‘premium’ ranges. The classic range offers landlords fixed and tracker mortgages up to an eighty per cent loan to value on loans between fifty and four hundred thousand pounds, while the premier range offers seventy per cent loan to value on loans between six hundred thousand and one million pounds.

Discussing their new products, Rob Lankey, managing director of commercial mortgages at Aldermore, which funds the Keystone products, said: “The cost of three- and five-year funds has been rising in recent months, and the new ranges allow us to adjust our pricing accordingly. However, we appreciate that brokers often spend a lot of time putting together deals that stack up before submitting applications, so this overlap will give them time to finish the cases they are currently working on without having to redo the figures.”

Meanwhile, Andrew Rowe, sales manager at Norwich-based mortgage broker TurnKey Landlords, said: “It is interesting that this product range aligns itself in direct competition with both Paragon and The Mortgage Works in terms of fees, LTV bands, rate offering and its target market of limited company and HMO borrowers.

“From an interest rate point of view, it is falling slightly short against its competition. However, it will be interesting to look at agreement-in-principle conversions against the other players when considering client credit history. Traditionally, Aldermore has accepted impaired credit applications that Paragon and TMW may have turned down, and this could become its niche.”

Even though it sounds like good news for landlords, there have been rumours that it is likely the Bank of England will increase its interest rate within the next twelve months, or even sooner. Even though the Governor of the Bank of England, Mark Carney, recently said he did not think it was necessary to increase the rate, with the UK’s economy improving and unemployment down to just 7.1 per cent, it is likely that the Bank will soon change its mind. David Whittaker from Mortgages for Business agrees with this view, and said: “Ultimately lenders will have to recognise the increasing cost of funds.

“It is highly likely that interest rates will rise on medium term fixed-rate mortgages, reflecting the impending rise in Bank Rate. Once Bank Rate starts to move, 20 years in the industry has taught me that it will move faster and higher than anyone expects. Our advice is to consider taking a five-year fixed-rate mortgage to delay the impact of rate rises.”

Those thinking about investing in new properties need to also consider the fact that they will have to pay for landlord insurance, as well as any renovation work required before a new property goes on the market. In general, it looks like the private rental market will fare well over the next few months, however changes are looming on the horizon.

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