Landlords are being insulated from the worst effects of interest rate rises because lenders are so keen to win and keep their business.
That’s the view of online mortgage broker Property Master.
It says the recent two increases in the Bank of England base rate – up from 0.1 to 0.25 per cent in December and from 0.25 to 0.5 per cent this month - have fed through to landlords on Standard Variable Rate mortgages but the picture is more mixed for the cost of buy-to-let two- and five-year fixed rate mortgages.
Property Master says a typical buy to let SVR mortgage has a rate of 4.84 per cent, up 0.1 per cent on early December; this takes the monthly cost of a typical SVR up £12 a month, from £593 to £605 for a typical landlord loan of £160,000 with a Loan to Value of 60 per cent.
The cheapest typical buy-to-let mortgage is for a 2-year fixed rate mortgage, again for £160,000 with an LTV of 60 per cent, which has moved up slightly from 1.69 to 1.76 per cent, an increase in monthly cost from £262 to £271 once fees are included.
However, the broker says other two-year fixed rates have barely moved at all. And there is even less movement in buy-to-let five-year fixed rate mortgages.
Property Master says competition in this sector amongst lenders is particularly fierce because of the high number of five-year mortgages taken out to beat changes in regulation, but which will mature and require renewing in the coming year.
The cheapest typical five-year fixed rate buy-to-let mortgage is priced at 1.98 per cent, which equates to a cost of £278 per month once fees are included.
The broker’s chief executive, Angus Stewart, says: “Lenders were quicker to pass on to customers with Standard Variable Rate mortgages February’s base rate increase than they were in December. However, it is a different picture when it comes to fixed rate mortgages, especially the more popular five-year fixed rates.
“Lenders knew there would be high demand for five-year remortgages and may well have set aside a war chest to serve demand. They are competing hard for business and that has to some extent insulated landlords using this type of mortgage from a sharp increase in costs.”
But Stewart warns: “We cannot really expect this situation to persist as the Bank of England base rate continues to move upwards as most commentators expect it to do so. The Monetary Policy Committee meets again on March 17 and with inflation where it is now, we should brace ourselves for another rate rise, especially as there are no more Monetary Policy Committee meetings planned until May.”
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