The vast majority of buy to let landlords in the UK chose fixed rate mortgages with a large number opting for a five year deal, the latest lending index shows.
Overall 93% of landlords financing buy to let property chose a fixed rate mortgage in the second quarter of 2018 and 69% went for a five year lending deal while those without fees were also popular.
Indeed, the buy to let mortgage index published by Mortgages for Business shows that an increasing number of lenders are offering products free from arrangement fees. In the second quarter 20% of all products had no fee attached, up from just 14% in the third quarter of 2017.
Other incentives were also on the increase, including cash back, free valuations and free legal advice for landlords remortgaging property. The average flat arrangement fee, however, increased slightly in the quarter to an average of £1,389, but the index report says that at less than £1,500 this still represents reasonable value.
‘We’ve been recommending five year fixed rates for a long time. At the moment there is very little difference in pricing between fixed and variable rate product,’ said David Whittaker, chief executive of Mortgages for Business.
‘In today’s uncertain economic climate, particularly the road crash Brexit negotiations, fixing makes a lot of sense, especially as the average price is just 3.52%,’ he pointed out.
The index also shows that the number of lenders offering products to landlords borrowing via limited companies increased by three so that now half of all buy to let lenders now offer mortgages to corporates.
Remortgaging continued to outstrip purchases, although there were still more buy to let purchase transactions by landlords using limited companies. At 8.6% HMOs produced the highest gross annual yields.
Meanwhile, the latest update from UK Finance, which represents the vast majority of lenders, shows that estimated gross mortgage lending for the total market in June was £23.5 billion, up 6.6% from May and 2.1% higher than a year earlier.
The number of mortgage approvals by the main High Street banks in June fell by 2.1% compared to the same month a year earlier. Within this only remortgaging approvals increased and were 3.4% higher than for the same period a year earlier but this was offset by the 4.7% reduction in house purchase approvals and 4.3% drop in other secured borrowing.
The likelihood of an increase is still encouraging remortgagers and first time buyers to secure the best available deals, according to Henry Woodcock, principal mortgage consultant at IRESS. ‘Lenders are offering an array of incentives, not just a competitive rate, with affordability criteria being relaxed to provide more bespoke deals to applicants. So, there is evidence that lenders are still fiercely competing to secure volume,’ he explained.
Jeff Knight, director of marketing at Foundation Home Loans, pointed out that lenders are adapting to changing demands from landlords, home movers, first time buyers and those remortgaging.
‘With lenders offering borrowers more choice, it is clear the changing demands of the market are being met, reflecting the tendency to browse offers before opting in. We are continuing to see specialist cases take up a larger portion of the market, proving demand from buyers persists, in spite of any political or economic uncertainty,’ he said.
