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Record number of buy to let mortgages are now available in the UK with landlords able to choose from 817 different products, up 16% quarter on quarter, the latest index shows. Lower LTV fixed rate mortgages are now cheaper than equivalent tracker products, even before rates rise, according to the latest Buy to Let Mortgage Costs Index from Mortgages for Business. Mortgage charges have fallen further for lower LTVs while landlords at higher LTVs pay extra fees. However, the cheapest mortgage rates and lowest fees have been reserved for low loan to value ratios. ‘This unprecedented pick up reflects the huge increase in demand as well as the wider importance of the buy to let industry,’ said David Whittaker, managing director at Mortgages for Business. ‘Looking at total lending in 2014 the trend is clear. For a second consecutive year the value of the buy to let market grew by almost a quarter. We anticipate further growth in 2015 but at a slower rate as the market takes an inevitable breather after such a huge sustained spurt,’ he added. The research suggests that fixed rate mortgages are proving to be better value than their respective tracker counterparts, particularly for lower loan to value borrowers. Low LTV mortgages now outperform their tracker equivalents at two, three and five year periods. Likewise, at medium LTVs, the costs for a two year fixed rate is 4.4% compared with 4.7% for the tracker equivalent, while for three year products the costs are the same and only 0.3% higher than the tracker products for five years. Even for fixed rate high LTV mortgages, the current cost of borrowing is only marginally higher than tracker products. To fix for five years at a high LTV is just 0.4% more than the corresponding tracker. Only one in a hundred landlords now opts for a one year initial mortgage term. More widely, the popularity of short term mortgages continues to wane as 52% opted for a two year deal, down from 57% six months ago despite the very attractive two year rates on offer. By contrast longer term mortgages are growing in popularity, with the proportion choosing five year mortgages rising from 15% in the second quarter to 18% in the fourth quarter. ‘It’s astounding that fixed rate mortgages are already better value than their respective tracker counterparts. Again the real advantage is for the ‘safest’ landlords with the lowest LTV loans. But even though tracker products are a little bit cheaper at higher LTVs, in these cases too it soon won’t be enough to compensate for the likely increase in cost of trackers when rates inevitably rise,’ said Whittaker. ‘If customers are paying only a few percentage points above the negligible Bank base rate, then if this jumps it could mean a huge proportional increase in future costs. Capital markets are still reeling from tumbling inflation and a dovish outlook from the Bank of England that no one would have predicted… Continue reading →
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