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Percentage based BTL fees now more common than flat fees

The latest edition of the Buy to Let Mortgage Costs Index, published by Mortgages for Business, has found that percentage-based arrangement fees have become the new standard among buy-to-let mortgage products.

Flat fees have long been popular as a way for lenders to maintain profitability, while still offering competitive rates, while other products instead carry a variable fee based on the loan amount.

But the latest data from the first quarter of this year reveals that 44% of all buy-to-let mortgage products now carry a percentage-based fee, overtaking flat fees (41%) for the first time since 2013.


The data also reveals that there was a rise in the average flat fee, up to £1,446 from £1,397 in fourth quarter of last year and together these changes have increased the average effect of mortgage charges to 0.64%. This compares to 0.62% in Q4 and is the strongest effect observed since the first half of 2015.

Steve Olejnik, COO of Mortgages for Business, said: “With the challenges lenders have faced to generate business in the face of successive blows to the buy-to-let sector, it is only natural that many have chosen to focus on cutting rates at the cost of increased fees.

“The recent trend towards percentage-based fees is an example of lenders doing exactly this, as fees of this type become more expensive for larger loans.”

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