Standard Life Bank (SLB) has made its first move into the buy-to-let market, sparking fears among other lenders that margins may soon have to be cut as competition continues to grow.
The lender has launched a new product aimed at non-professional landlords which rewards those with a large initial deposit with a system of tiered interest rates based on LTV.
The buy-to-let market is becoming increasingly busy as lenders chase the higher margins of niche markets. But the situation is changing, as Patrick Day, managing director of Exclusive Connections, explained: ‘Although the buy-to-let market is still buoyant, the more lenders that enter the market, the more competition there is and thus the margins reduce.’
David Macmillan, director of sales and marketing at SLB, is however confident about the future of the market. ‘Buy-to-let is an expanding sector of the mortgage market and for good reason. Many people who have invested in the stock market have seen their returns diminish and those thinking about such investment for the first time are being put off.’
SLB has built in a degree of flexibility into its mortgage, allowing up to two payment holidays a year so that landlords can cope with a tenancy break.
Similarly, by overpaying, landlords will be able to build up a reserve for unexpected costs such as repairs. Its present rates range from 6.24% with a 1% discount for six months at a rate of 5.24% for LTV up to 50%, to 6.74% with a 1% discount for six months for LTV up to 80%.