Long term fixed rates have been flooding the market recently as mortgage rates continue to fall. With record low deals now on offer, borrowers with a 10% deposit have the opportunity to fix for five years at just under 3% or even below 2% for those with bigger deposits. Whereas the appeal of a two-year fix has always been low prices and flexibility, borrowers can now access very cheap rates yet with greater security, something that has become a priority for homeowners amid market uncertainty.
As far as the buy to let market is concerned however, rental calculations have become much tighter, often requiring rental coverage to be 125% based on a notional rate of 5%, rather than the actual interest paid. As the result of taxation and other regulatory pressures across the market, some lenders now require rental income to exceed 145%, based on 5% or even 5.5%. So with increasing capital values and low rental yields on top of that, the buy to let space has certainly become a problem for many.
With this in mind, our product of the week is a buy to let mortgage with a difference…
Five year fixed rate with a rental calculation of 125% at 3.98%
One of our favourite lenders is now offering a five year fixed rate with a rental calculation of 125% at just 3.98%, proving extremely beneficial for those trying to borrow against property with a low rental yield, especially for portfolios in London and the South East.
Currently the only product of its kind, this will allow landlords greater ‘buying power’ in terms of borrowing versus market rent – and best of all – comes with an excellent rate and a sensible fee to go with it.
This is a limited edition five year fixed buy to let product with a rate of 3.18% up to 70% LTV, or at 3.25% up to 75% Loan to Value (LTV). These are both available for purchase or remortgage and come with a 1.5% product fee (that can be added to the advance), plus an additional £199 application fee with free standard legal fees for remortgages.
This lender is equally flexible with other criterion and will accept a number of more specialist and unusual circumstances, including:
- “day 1” lease situations and inherited properties
- Property purchases next door, above, below or adjacent to your existing property
- A maximum lending age limit of 79 or 85 at the end of the mortgage term
- The ability to lend up to 100% on a block of flats (LTVs vary)
- Traditionally unaccepted commercial property, such as restaurants, pubs, dry-cleaners etc.
What the lender needs to know
Essentially, this lender encompasses the case-by-case approach we believe in at Enness, and will consider cases even if they fall below the required amount of rental cover – unlike the rigid criteria found on the high street. To complete a stress test in this instance the lender would require the following information:
- Your personal income and rental income
- The value of your property
- Any existing credit cards that will remain after completion
- Your monthly personal loan payments
- Your residential mortgage payments (or the rent you pay if you’re not an owner-occupier)
This is a hugely beneficial rental calculation, which could prove just the right product to enable maximum gearing before the Prudential Regulation Authority (PRA) recommendations come into force later in the year. Set to target service and affordability, this has the potential to make the market even trickier to navigate.
This is the lowest buy to let rate to date from the lender and is only likely to stick around for a limited period, so now is the time to take advantage!
If you have a buy to let mortgage due a renewal over the next six months, plan to purchase another property, or simply wish for more information on products like these – contact us. Our expert advisers are on hand to answer your questions, day and night.