For the first time in more than 10 years, the Bank of England has raised interest rates.
What does this mean for buy-to-let? Can landlords mitigate the interest rate hike? Is now the time to remortgage?
We ask finance experts, Capricorn Financial, for their advice, plus their thoughts on the best buy-to-let mortgage rates currently on the market.
If you’d like to find out the current value of your property, or if you’d like to see if you’re charging the correct rent, check out our instant property valuation tool.
Can Landlords Mitigate The Interest Rate Hike?
Landlords are already seeing their profits decrease as a result of recent tax changes and changing legislation, and the recent interest rate increase will simply add on more costs.
Mark Lawrinson, Portico's Regional Director, says landlords can mitigate the hit by cutting their interest costs:
“Buy-to-let mortgage interest rates have dropped dramatically in recent years, so deals currently on the market will be a lot better than products arranged a few years ago. It’s sensible therefore to shop around and remortgage. That being said, landlords will now have to consider the new PRA rules.
With large increases in property prices in London over the last five years, another tip is to get your rental property re-valued. This will make your lender recalculate your LTV, and a lower LTV means a better interest rate and a larger choice of lenders.”
What Are The Best Buy-to-let Mortgage Deals Currently On The Market?
Capricorn have recommended the following buy-to-let rates - but have stated that they do not take into account a landlords exposure to a lender, number of properties owned, personal income, or the rental income of the subject property. The lenders names have been omitted as there are multiple lenders in each category, and it really does depend on the client’s situation, number of properties and the rental income of the property. There are over 30 lenders in this arena, so please get in touch if you’d like to find out more.
They have assumed a purchase price of £500,000 across the board.
75% Loan-to-value (LTV)
The best buy at 75% loan to value has a 2 year fix rate of 1.89% and comes with no lender, arrangement fee or booking fee. It is important to consider that there are lower initial rates available e.g. 1.32% but this comes with a higher arrangement fee that makes the total cost for comparison over 2 years higher than the 2 year fixed rate of 1.89%. Customers should consider all fees over the course of their intended initial period or term before deciding on the appropriate mortgage product.
The best buy at 75% loan to value for a 5 year fix has an initial rate of 2.49% and comes with no lender arrangement fee, booking fee or survey fee, making it potentially attractive for those customers not wishing to pay upfront lender fees.
60% Loan-to-value (LTV)
The best buy at 60% loan to value and a 2 year fix rate of 1.49% and comes with an arrangement fee of £999 and £310 survey fee. The lender also offers a cashback feature of £250.
The best buy at 60% loan to value and a 5 year fix rate of 2.09% and comes with an arrangement fee of £1995 and a survey fee of £275. The lender also offers a cashback feature of £500.
What Percentage Deposit Do I Need For A Buy To Let Mortgage?
There are lenders who will accept a 15% deposit, however, because of the new rental stress tests this is not feasible in London.
The majority of lenders require 25% deposit, again this is restricted by the rental stress test. Realistically in London, based purely on rental income you should aim for between 30% and 40% deposit depending on the area.
A few lenders allow you to take your income into account to cover the shortfall, therefore speak to an adviser before looking at BTL properties beyond 60% LTV.
We recommend you take legal and tax advice before making any financial decisions. If you’re interested in any of these mortgage rates, or speaking to an expert mortgage broker, give us a call today on 0207 099 4000.