Complex Buy To Let
Landlords have been ‘largely insulated’ from bank rate rises
Buy-to-let (BTL) rates have not been hit as hard by base rate rises as lenders have been competing for business.
According to Property Master’s latest BTL tracker, landlords on a standard variable rate (SVR) BTL are on an average of 4.84 per cent as of February, which is up 0.1 per cent on December and prior to the first base rate rise.
This means that the monthly cost of a typical SVR has gone up from £593 to £605. The calculations are based on a landlord loan of £160,000 at 60 per cent loan to value (LTV).
On the two-year fixed rate side, again based on a £160,000 loan at 60 per cent LTV, it has increased from 1.69 per cent to 1.76 per cent. Consequently, the monthly cost has risen from £262 to £272.
Movement is more muted for buy-to-let five-year fixed rates, which Property Master said was partially driven by “particularly fierce” lender competition as more borrowers have opted for longer fixed rate terms which are coming up to maturity in the coming months.
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The lowest five-year fixed rate BTL deal is priced at 1.98 per cent, which is equivalent to £278 per month.
Angus Stewart, chief executive of Property Master, said: “Lenders were quicker to pass on to customers with SVR mortgages February’s base rate increase than they were in December.
“However, it is a different picture when it comes to fixed rate mortgages, especially the more popular five-year fixed rates. Lenders knew there would be high demand for five-year remortgages and may well have set aside a war chest to serve demand. They are competing hard for business and that has to some extent insulated landlords using this type of mortgage from a sharp increase in costs.”
He added: “However, we cannot really expect this situation to persist as the Bank of England base rate continues to move upwards as most commentators expect it to do so.
“The Monetary Policy Committee meets again on March 17th and with inflation where it is now, we should brace ourselves for another rate rise, especially as there are no more Monetary Policy Committee meetings planned until May.”