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Buy-to-let rates fall but question mark hovers over optimism for market

Buy-to-let two and five-year fixed rates have fallen on average by more than a quarter of a percent year-on-year, analysis from revealed.

The average two-year fixed rate has dropped from 3.07 per cent in February 2019 to 2.75 per cent this month.

The five-year average fixed rate has fallen from 3.56 per cent to 3.20 per cent over the same period.

According to Moneyfacts’ analysis, if a landlord had a five-year fixed rate mortgage in 2015 and was looking to refinance, the average rate has dropped by 1.19 per cent. This would mean a difference of £1,947 a year in monthly repayments if a landlord were to take a loan of £250,000 on a 25-year term compared to back in 2015 for the same amount and term.

Rachel Springall, finance expert at, said: “Lenders have cut rates on both short-term and long-term deals by around 0.30 per cent year-on-year, so there could be borrowers looking to switch their deal. Cutting down on monthly loan payments may be at the forefront of landlord’s minds considering the mortgage tax relief changes.

“Since April 2017, mortgage interest tax relief for buy-to-let landlords – which allowed them to deduct mortgage expenses from rental income to reduce a tax bill – has slowly been phased out. Indeed, by April this year it will be gone entirely, which means landlords could face a larger tax bill and less rental income as a result. This shake-up may deter potential landlords who feel their profit margins will be tightened, but despite this, optimism for 2020 appears resilient and lenders are clearly working hard to entice prospective borrowers. However, it is hard to tell whether this will wane as the year progresses.”

Landlords expect business to increase

Using a limited company to buy properties, rather than purchasing houses as an individual, is one way to side step the cuts to mortgage interest relief, although limited companies do come with their own tax burden.

Nigel Terrington, chief executive of Paragon Bank, said it was too early to tell whether recent positive surveys highlighting landlords’ improved confidence could be sustained.

The changes to tax relief for landlords and the introduction of three per cent stamp duty on second homes has caused thousands of landlords to exit the market or look for alternative ways to make money from the rental market. As well as setting up as a limited company, landlords are also looking to the holiday let market.

Research by the Association of Residential Letting Agents (ARLA) and Capital Economics found that of the overall landlord population, 2.7 per cent have changed from long-term tenants to short-term lets. This equates to 46,000 properties made unavailable to local people looking for a home. In London the issue is bigger, with four per cent of investors now offering short-term lets over homes previously used for longer term rentals.

The number of active listings on Airbnb in the UK increased by a third to 223,000 in 2018 from 168,000 in 2017, the research showed.

And in the capital, the number of active listings on Airbnb jumped four-fold from 18,000 in 2015 to 77,000 in 2019.

In Edinburgh short-term lets tripled in just three years, with 32,000 active listings in 2019, up from 11,000 in 2016.

Written by: Samantha Partington

Source: Your Money

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Ipswich cuts buy-to-let rates and launches later life product

Ipswich Building Society has reduced the rates and fees on its existing buy-to-let 5-year fixed rate products and launched a product to its existing range of later life mortgages.

Both buy-to-let rates are a 5-year fix. There’s a 3.75% at 80% LTV, with a completion fee of £950 and an expat buy-to-let at 3.99% and 75% LTV with a completion fee of £999.

There’s also a 5-year fixed later life fixed rate at 3.50% and 75% LTV with a £500 completion fee and minimum loan of £25,000.

Richard Norrington, chief executive at Ipswich Building Society, said: “By recognising buyers’ demand for longer term mortgage products at this time, and adjusting our rates to reflect this, we are pleased to offer our borrowers stability with regards to their monthly mortgage commitments.

“Landlords, including those based overseas, and older borrowers often have an unusual set of circumstances or changing lifestyles and incomes.

“Our manual underwriting approach, which sees real people making the decisions about affordability, allows us to assist borrowers who may otherwise be denied access by the automated approach deployed by some mortgage lenders.”

All deals are available from five to 40-year terms up to a maximum loan of £500,000 and have an application fee of £199, CHAPs fee of £35 and a tiered valuation fee based on property value.

For standard buy-to-let and later life remortgage applications, there is a free valuation up to property value of £1m and fee assisted legals.

During the fixed rate period the products offer fee-free overpayments up to 50% of the original loan amount.

Source: Mortgage Introducer

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Buy-to-let rates fall

The cost of a typical 5-year fixed rate buy-to-let mortgage has fallen since the start of the year despite speculation that the Bank of England will soon increase base rates again.

This was found by a Mortgage Tracker launched today by Property Master, a digital start up that uses algorithms to match the requirements of individual private landlords against the entire buy-to-let mortgage market of some 2,000 plus products.

It revealed that average 2-year fixed rates based on 65% of the value of the property and 75% of the value of the property also declined from January to May 1st of this year. Only 2-year fixed rate mortgages for 50% of the value of a buy-to-let property increased over the five-month period and then by 0.42%.

Angus Stewart, chief executive of Property Master, said: “This is quite a significant increase and perhaps reflects that there are fewer lenders discriminating at the 50% LTV level.  Lenders are clearly taking margin here and giving back on other LTV levels.”

Savings on a 5-year fixed rate buy-to-let interest only mortgage on a typical property worth £180,000 ranged from £5 to £15 per month and on some 2-year fixed rates from £10 to £15 a month.

Stewart added: “Our findings show that there are some very good deals out there for landlords despite worries over any future increase in base rates.

“The Monetary Policy Committee meets again this coming Thursday (May 10th) so we will see what happens then but there may be other factors operating in the buy-to-let market which explains the decline in costs that we have seen.

“Our findings come on the back of recent research revealing that the number of buy-to-let products currently on the market has reached a record high, so it could be that we are seeing landlords benefiting from unprecedented competition amongst lenders for their business.  This is very good news indeed.”

Source: Mortgage Introducer