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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.
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