The mortgages cost index showed that while the amount of products available has risen across all categories, longer-term products are gaining popularity, with three and five-year rates collectively securing 9% of the market.
Charges on buy-to-let mortgages, including lender arrangement fees, valuation fees and legal costs, have continued to have a declining impact on the overall product cost. This is particularly noticeable in high loan-to-value (LTV) products. Where charges had previously contributed an additional 0.90% to the headline rate in 2014, this has now dropped to 0.67% in Q3 2015.
On average, charges now add an additional 0.48% to the headline rate, falling from 0.52% in the previous quarter and down from 0.67% in Q1 2013, when the index was launched.
The number of arrangement fee-free deals has also increased in quarter three, which the index said was due to lenders exploring ways to compete without reducing record-low headline rates.
Some 17% of products in the third quarter of this year were offered without lender arrangement fees, up from 13% in the second quarter. The number of products with flat fees also fell marginally from 47% to 46% in quarter two. Products with percentage-based fees dropped the most in the third quarter, to account for 37% of all buy-to-let products compared to 40% in the previous quarter.
Simon Whittaker, finance director at Mortgages for Business, said: “The recent falls in swap rates, almost back to levels similar to the start of the year, have helped lenders trim prices but while they continue to be attracted to the buy-to-let space, they are having to be ever more creative to find the balance between maintaining their margins and offering competitive products. When looking at the market and the wider economy, the balance seems to have tilted towards there being no increase in Bank Rate for quite a few months yet.”
