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Competition forcing lenders to cut buy-to-let margins – Mortgages for Business

  • 02/05/2018
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Competition forcing lenders to cut buy-to-let margins – Mortgages for Business
Lenders are opting to reduce the margins they enjoy on longer fixed rate buy-to-let deals in a bid to remain competitive, Mortgages for Business has suggested.


The broker’s latest Buy to Let Mortgage Index noted that the average rate charged on a five-year fixed rate buy-to-let mortgage stood at 3.52% in the first quarter, down from 3.55% in the same period last year.

The firm noted that this price cut has come despite a steady increase in five-year swap rates, which has led to the conclusion that lenders are choosing to enjoy smaller profits in order to keep competitive.

There have been slight increases in the pricing of shorter fixed-term deals over the same period. The average rate of a three-year fix had moved from 3.33% to 3.34% while for two-year deals the typical rate moved from 2.93% to 3.01%.

The report also found that the average pricing on rates to those borrowing via limited companies also fell, except on five-year fixed rates which rose from 4.2% to 4.3%.

While there was no change in the number of lenders active in this area of the market, there was a 1% increase in the number of corporate mortgages available.   


Fee-free deals

In addition, the study identified a growth in the number of arrangement fee-free deals for the fourth straight quarter. Around one fifth (19%) of all products came with no arrangement fee in the first quarter, compared to just 11% in the second quarter of 2017.

Around 39% charge a flat fee, at an average of £1,441.

David Whittaker, (pictured) chief executive officer at Mortgages for Business, said: “While the current picture shows that lenders and landlords have much to accommodate, the data reveals that slowly, both are moving towards solutions which should keep buy to let a popular if less prolific investment in the years to come.”

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