With all the regulatory changes that have been affecting the buy-to-let market of late, you might think that rates have just been shooting up, but Mortgages for Business found that lenders have been taking a lot of the heat themselves to try and remain competitive.
Their Buy to Let Mortgage Costs Index reveals that SWAP rates, which usually have a massive influence on fixed mortgage rates, increased in the last three months of 2017. Concurrently, the cost of lending also increased, yet buy-to-let lenders chose to decrease the margin between their offered rate and the SWAP rates instead of hiking rates, keeping their products attractive to borrowers.
As a result, the margin between the average SWAP and buy-to-let rates declined by 0.4% over the course of 2017. However, not only is such a decrease in margins unsustainable over the long run, Steve Olejnik of Mortgages for Business warns: "I doubt that lenders will consider lowering rates again. If anything, I would expect them to find ways of making up for the lost margins, particularly given that overall buy-to-let lending looks set to dip this year."
Yet interestingly, their research found no massive increase to product fees, as lenders continued to add an average of 0.58% to advertised rates while the number of fee-free products actually increased, from 14% in 2017's third quarter to 16% in quarter four. The average fee rose by only £53, to £1,423, during that time.
Steve commented: "Looking back over the last couple of years, flat fees have actually come down in price from over the £1,500 mark. The fact that they increased in Q4 could be a sign that borrowers are about to experience price hikes not only on the underlying costs, but also at the point of sale. Now is definitely a very good time for landlords to review their borrowing arrangements."
To that end, anyone looking to take out a new buy-to-let mortgage, or remortgage their current deal, would do well to take a look at our Best Buy charts, and take advantage of both low rates and fee-free deals while they're still around.
Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.