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Buy-to-let mortgage costs untouched by base rate decision

  • 07/01/2022
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Buy-to-let mortgage costs untouched by base rate decision
The average cost of a buy-to-let fixed rate mortgage has remained largely unchanged despite the Bank of England (BoE) increasing the base rate from 0.1 per cent to 0.25 per cent in December.


According to Property Master’s buy-to-let mortgage tracker, the average rate stands at 1.69 per cent in January. The firm said when it ran the tracker in November, the average rate was 1.69 per cent then it fell to 1.68 per cent in December before rising nominally this month. 

Based on a two-year fixed rate deal with a loan of £160,000 at 60 per cent loan to value (LTV), Property Master found that once fees are included this translates into a monthly cost of £262.

Meanwhile, the average cost of a buy-to-let mortgage on a standard variable rate (SVR) rose by 0.03 per cent to 4.77 per cent. 

However, the broker firm warned buy-to-let costs would not remain unaffected for much longer if the base rate goes up at the next BoE meeting on 3 February. A number of lenders have also stated that changes to their SVR will come into effect on 1 February. 


Borrower and property types 

The tracker follows 30 lenders who constitute around 75 per cent of total buy-to-let mortgage lending and looks at how borrower or property type might impact pricing. 

It found that the average cost of a two-year fixed rate mortgage for a landlord borrowing through a limited company rather than as a private individual was 0.11 per cent more on the interest rate charged and £54 on the monthly cost.   

Calculations were based on a 60 per cent LTV mortgage with a loan of £160,000 and include the cost of fees averaged out over the term of the fixed rate.  

Typically, fees for limited company mortgages are higher than for individual landlords.   

For a five-year fixed rate mortgage for the same amount, the differential was 0.49 per cent more on the interest rate and £80 on the monthly cost, including fees. 

The average two-year fixed rate mortgage for a houses in multiple occupation (HMO) purchase has a rate of 3.80 per cent which translated into a monthly cost with fees of £562. For a five-year fixed rate mortgage, this same purchase would cost 4.49 per cent with a monthly cost of £646.   

The higher cost of borrowing to buy an HMO may be because of the risk lenders believe these properties represent.  

For holiday lets, the average two-year fixed rate mortgage stood at 3.52 per cent with a monthly cost of £507 including fees. The same loan over five years charged a rate of 3.75 per cent with a monthly cost of £520 including fees. 

Angus Stewart, chief executive of Property Master, said competition in the buy-to-let mortgage market had cushioned landlords from increased costs that may have been expected following a rise in the bank base rate.  

He added: “The question is for how much longer given that the expectation is growing the Bank will move again in the first week of February. This could very well be a small window for landlords to bag a good rate before the market moves more decisively into a rising interest rate environment.” 

Stewart said: “What we can say with certainty is the availability of low buy-to-let mortgage rates has to a large extent obscured the pressures on landlords operating in the private rented sector. The increasing cost of regulation, higher taxes and the removal of various tax benefits has been able to happen to very little affect whilst finance costs remained low.  

“If this changes, it will hit landlords hard, and we may well see at least the smaller ones deciding buy-to-let is no longer a sensible investment for them.” 


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