It seems that the Buy to Let market is really rocking at the moment and lenders are doing all they can not to trip over each other to lend.
New products and criteria changes are making this area of lending very attractive and there are now rates available that were once only dreamed of in the residential market. High street lenders such as Santander and NatWest now rival traditional Buy to Let providers like BM Solutions, Paragon and The Mortgage Works.
Low rates are very much the order of the day, with variable tracker rate products available from just 2.09% (4.8% APR) and 2 year fixes from as little as 2.19% (4.8% APR) with arrangement fees of 2.5% of the loan amount. If the fees are too bulky there are products available with reasonable fees from just 2.25% (4.3% APR) which really is rather extraordinary.
Amongst the movements over the past few days in this sector we have seen The Mortgage Works re-launched their Let to Buy products which now mirror their impressive suite of standard Buy to Let rates up to 75% Loan to Value, (LTV). This gives those home movers more choice when trying to hold on to their existing property and rent it out; something we are seeing much more of recently.
Nottingham have increased their maximum age to 75 rather than 70 on Buy to Let business, whilst lenders such as Accord and Virgin have all reduced their Buy to Let rates recently.
Five year fixed rate products have also improved in this area with NatWest, Virgin and Accord all having products available under 4% with reasonable fees. For those who want a secure fees free product, Clydesdale Bank have launched a 5 year fix at 4.79% (5.3% APR).
The key to remember is the rental yields and as a rough rule of thumb lenders require the rental income to at least equal 125% of the monthly mortgage payments at an assumed rate of 5%. This is a calculation we can easily work out to determine the maximum amount of borrowing and there are some cases when this can be reduced further.
With rates this low, we are seeing many property investors extend their mortgage borrowing to make their cash go further. After all, why buy one property when you can borrow at low rates and buy two?
There is no Guarantee that it will be possible to arrange continuous letting of the property, nor that rental income will be sufficient to meet the cost of the mortgage.
Your property may be repossessed if you do not keep up repayments on your mortgage.
A fee of up to 1% of the mortgage amount may be charged depending on individual circumstances. A typical fee is £495.