Business & Investment

Buy-to-let mortgages are flooded with 200 loans launched in March, but interest rates are the highest since 2019.

Landlords are seeing more mortgage trading options available as the number of products on the market increased by 233 in the last month alone.

According to the latest Moneyfacts data, mortgage options increased for the fifth straight month in March, meaning a total of 2,333 buy-tourt products are available.

This means that the number of buy-tourt mortgages available is currently at its highest in a year after the lender withdrew some goods at the start of the pandemic.

The average two-year fixed interest rate on buy-tourt mortgages is 3.05% to 0.28% higher than last year before the pandemic.

Mortgage availability in the by-touret sector has recovered to 81% of pre-pandemic levels. This is comparable to the 68% recovery seen in the homebuyers’ mortgage sector.

According to real estate agent Hampton International, there are just under 2 million unpaid buy-tourt mortgages in the UK.

Many landlords will also consider mortgage repayments over the next few months as the five-year fixed-term transaction to avoid the 2016 tax hike will end.

Mark Harris, CEO of Mortgage Broker SPF Private Client, said:

“Many of these transactions are based on five years of merchandise, so landlords will need to review their portfolio over the next few months and close these transactions.

“Most landlords don’t want to switch to the current lender’s standard floating rate (usually higher).”

The landlord is also trying to take advantage of the recent stamp duty holiday extension to buy a new property.

According to the Hamptons, in the last few months of 2020, about 15% of UK homes were bought by investors and almost half of all investors’ purchases were funded through mortgages.

Eleanor Williams, a Treasury expert at Moneyfacts, said:

Interest rates rise during the pandemic, and some experts believe that interest rates are unlikely to fall

Interest rates rise during the pandemic, and some experts believe that interest rates are unlikely to fall

“Perhaps by refinancing an existing buy-tourt mortgage, some landlords may focus on reducing costs and increasing margins when possible.

“Similarly, some may be in a fortunate position to consider investing in a rental property for the first time.

“Therefore, it is essentially positive that the number of available products has recovered further, with 233 transactions increasing to 2,333 this month, the highest since this time last year.”

What happened to the buy-tour interest rate?

Despite the increase in transactions, buy-to-let mortgage rates continue to rise.

According to Moneyfacts, the two-year average fixed rate is currently 3.05%, 0.28% higher than the previous year, the highest average since June 2019.

The average fixed interest rate transaction for five years was 3.41%, an increase of 0.17% compared to a year ago.

However, those with large deposits and those with healthy equity in existing properties show signs that interest rates are starting to fall.

The average mortgage two-year fixed rate transaction for a mortgage that covers 60% of the value of real estate has fallen from 2.52% to 2.14% in the past month alone.

So if your mortgage is £ 120,000 for £ 200,000 real estate, you can expect the average two-year fixed-trade buy-tour borrower to pay interest only for a 25-year period today to pay £ 214 instead of £ 252. I will. During February.

“It’s all about perceived risk,” says Andrew Montlake, managing director of mortgage broker Coreco.

“Lenders are concerned about furloughs and the economic downturn in redundancy that have affected tenants paying the landlord’s rent, thus avoiding higher loan-to-value loans and raising product prices. , The business they undertake at this level.

What are the main hurdles for a buy-touret borrower?

The biggest hurdle for a buy-tourt mortgage borrower is the rental stress test, which determines how much you can borrow.

Mortgage lenders require landlords to prove that their rental income covers 125-145% of their mortgage payments, based on a virtual interest rate of 5.5%.

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Whether a borrower takes a stress test at 125% or 145% depends primarily on their income tax range and how long they want to modify.

“If your income is now putting you in a higher tax bracket, this may mean that you can borrow less than you thought,” says Monlake.

“But now there are more lenders who may be able to adopt top slicing, where reserve disposable income can be used to make up for the lack of rental income.”

Another issue for landlords seeking a remortgage is the cladding scandal. This has affected thousands of private apartments across the UK.

“Landlords paying off their mortgages for the first time since the new rules were introduced will be amazed at the amount of information you need to create now, especially for landlords with medium to large portfolios.” Said Monlake.

“For those who use brokers, it’s easier to navigate new markets and avoid various pitfalls, but often achieve rates that weren’t otherwise found.”

What happens to buy-tour interest rates?

Although mortgage rates were low before the pandemic, they are still very low from a historical point of view, and some experts feel that they are unlikely to fall further.

“While competition between lenders is intensifying, it seems unlikely that interest rates will fall further,” Monlake said.

“Recently we’ve seen swap rates. This is the rate at which lenders set a fixed rate and is rising, so it seems like it’s a good time to fix it, if possible. I will. “

“Repayment is a good catalyst for considering your goals and objectives, not just for this property, but for your entire portfolio, especially for the tax treatment of your investment.

“For example, it may be time to switch from a personal name to a limited liability company, but it’s important to get independent tax advice first.”

Should borrowers fix interest rates longer?

Five-year fixed rates have become popular with landlords in recent years because they have less rigorous stress testing on these transactions and allow borrowers to borrow more loans.

Nicholas Molly, Product Technical Manager at broker John Charcol, said:

“My advice for buying to a landlord is to think about the associated fees. A fixed interest rate of 5 years can result in slightly higher interest rates, but you don’t have to do anything for 5 years, You don’t have to do anything for two years. The transaction requires you to take out a remortgage every two years, which means fees and hassles.

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Buy-to-let mortgages are flooded with 200 loans launched in March, but interest rates are the highest since 2019. Buy-to-let mortgages are flooded with 200 loans launched in March, but interest rates are the highest since 2019.

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