Lifetime tracker products have become increasingly popular in the buy to let market over recent months, as the Prudential Regulation Authority (PRA) prepares to clamp down on more generous pay-rate rental calculations across the market.
New underwriting rules will soon mean that higher and additional tax-paying landlords will struggle to deduct mortgage interest from rental income before calculating their tax bill, making it increasingly difficult to make a profit which could deter new landlords from entering the market altogether.
Although lenders are still able to factor in a rate rise of up to 2% when calculating a landlord’s affordability, this is a standard that many lenders have already been following as part of the tougher regime adopted ahead of the further tax changes expected in April 2017. It has since become the norm for lenders to calculate affordability using an interest pay rate of 5.5% and an applicant being able to cover at least 125% of their monthly mortgage payments with rental income from the property.
Lenders may have restricted slightly but there are still pay rate lenders available. However, once the PRA changes come into place, it will be even more difficult to secure one and borrowers may find themselves unable to remortgage off a lender’s Standard Variable Rate (SVR) as a result.
If landlords capital raise as much as possible on a pay rate mortgage they may find themselves stuck on a SVR, yet by securing a lifetime tracker now instead, they can be in a position where they will not have to worry, as the rate will simply track the base rate.
Buy to let lifetime tracker with 125% times 3.68% rental calculation
In line with this, our recommended product for this week is a buy to let lifetime tracker with a rental coverage of 125% times 3.68%, which is currently the most competitive pay-rate product available on the market.
This is a limited edition product available for the Autumn and is unlikely to be available once the PRA introduce the new legislation. We would urge you to take advantage of a product like this now if you wish to raise additional funds from an investment property!
There is only one other product on the market that is close to competing with this lifetime tracker, which comes with a rate of 4.59% with no fee, or 3.99% with a £3,995 fee. However, the rental calculation for this offer is not quite as generous.
Overall, a buy to let lifetime tracker with a rate of 3.68%, a maximum LTV of 75% and no product fee is an extremely lucrative deal, with the most competitive rental calculation available making it even more accessible and affordable, allowing borrowers the freedom of not worrying about remortgaging for a certain number of years.
Essentially, now is the time to secure a deal such as this one while it lasts, which will ensure security and reassurance as changes continue to hit the buy to let sector. We have excellent relationships with this particular lender, plus a multitude of others, that are still willing to offer some of the best terms available for those investing in buy to let property.
If you are interested in this product, have any questions for our expert brokers about the market or wish to be introduced to the relevant lender, please do not hesitate to get in touch.