No idea? I’m not entirely surprised as it’s been five years since they were in the news and sent shockwaves throughout the buy-to-let sector. Still unsure? Then let me elaborate.
They’re actually the reference numbers of the consultation paper from the Prudential Regulation Authority (PRA) and the supervisory and policy statements from the Bank of England which were introduced due to concerns about the potential harm to the UK housing market from uncontrolled and unaffordable buy-to-let lending.
Difficult as it might be to believe, we’re approaching the fifth anniversary of the introduction of new affordability standards which came into force on 1 January 2017 to bring all lenders up to prevailing market standards.
The new rules were also introduced to act as a guard against any slipping of underwriting standards during a period in which a firm’s growth plans could be challenged by the changing economic landscape and the impact of any forthcoming tax changes.
Longer term security against rate changes
Lenders were quick to embrace the new rules, with many introducing additional checks for customers opting for longer-term products to ensure they were in a position to manage any potential payment changes at the end of their product term.
Those investors who took up a five-year fixed rate mortgage back in 2016 will now be on the look-out for a new product as they approach the end of their initial fixed rate period. In fact, recent research by Twenty7Tec shows remortgage searches accounted for more than 40 per cent of the mortgage market in October, the first time this year they have reached that level.
Five-year fixed rate mortgages will always be a popular choice for landlords.
As I write this article, there are currently 1,258 five-year fixed rate buy-to-let mortgages available to landlords according to Moneyfacts and mortgage rates are at, or are certainly around, the lowest they’ve ever been.
The Bank of England finally increased the base interest rate after much speculation, and it’s widely predicted it will rise further in the not too distant future.
It means that for landlords looking to remortgage, a five-year deal could prove to be a good choice in the long run.
Of course, investors should always carefully consider the pros and cons of committing to a long-term deal, but for those looking for the peace of mind that comes with knowing exactly how much they’ll be paying each month, now could be the perfect time to make the most of a wide range of options and low rates whilst they last.