It’s all change in the mortgage market this week, especially after the Autumn Statement ruffled some feathers. With the news that stamp duty is to rise and tax reliefs are to be cut to 20%, it seems the market is looking no brighter for landlords at the moment… The good news is, despite speculation, rates still remain at a record low as lenders continue to hold their place amid tough competition.
Low interest rates have undoubtedly lured borrowers to the market, with BBA figures showing gross lending reach £12.8bn in October; 26% higher than the previous year and the highest figure since August 2008. Nationwide has also reported a record breaking half year with gross mortgage lending reaching £14bn in the 6 months to September – up by 14%.
Paragon Mortgages revealed a lending increase of 102%: a total of £1.33bn for the year with new applications up by 72% to the previous year. The lender has also launched a pilot range aimed at landlords, enabling them to hold portfolios in special purpose vehicles. Elsewhere, CHL Mortgages has stated that it will start lending for the first time since pulling out of the market in 2008, which perhaps could not have come at a better time for buy to let borrowers.
Many lenders have already updated rates in the wake of buy to let changes, with Santander adding 2 fixed rate products to its buy to let range, reducing rates on landlord remortgages by up to 0.5%. Fixed rate mortgages will be available at 2.94% at 60% loan to value (LTV) and 3.64% at 75% LTV. Both products come with a £495 booking fee and are available for purchases and remortgages. Santander has increased rates on its 5 year fixed rate products at 80%, 85% and 90% LTV. The range now stretches from 2.94% for an 80% LTV with a £995 booking fee, to 3.75% for a fee-free 90% LTV.
The general consensus when choosing a mortgage right now would be to look for the lowest rate. This certainly seems feasible with so many rate reductions happening across the market, yet there are always other details to take into account aside from a low rate; fees, freebies and cashback offers can all make a difference.
Research conducted by Moneyfacts revealed that homeowners could save over £1,500 simply by opting for a higher rate with a smaller fee. For example, the Post Office offers the lowest two year fixed rate at 1.15% but it comes with a hefty £1,995 arrangement fee. On a £150,000 loan, monthly repayments work out at £576 with a total two year cost of £15,819.
The cheapest option overall was neither the lowest rate nor the smallest fee: a 2 year fix at 1.54% with a £345 fee from Norwich & Peterborough Building Society, with a generous cashback offer and monthly repayments of £603 (a total cost of £14,317) – that’s £1,502 cheaper than the Post Office’s top rate and £581 less than their no-fee deal.
There are undoubtedly great opportunities still available on the market, particular for first time buyers. Aldermore has launched a new help to buy ISA in line with the Government’s scheme, available to savers with an existing cash ISA and new customers, as well as accepting transfers from other ISA providers.
Finally, TSB has raised rates on a selection of its home mover and remortgage deals by 0.1%. 2 year fixes to 75% LTV now stand at 1.69% with a £1.955 fee, and 1.79% with a £995 fee, or 2.19% for home movers and 2.24% for remortgages with no fee.
Its 60% LTV 5 year fixes are now 2.29% with a £995 fee and 2.49% with no fee for home movers, or 2.34% with a £995 fee and 2.59% with no fee for remortgages.
In terms of 75% LTV, 2 year trackers for home mover’s rates are 1.49% with a £1,955 fee and 1.99% with no fee. For remortgages they stand at 1.59% with a £995 fee and 2.04% with no fee.
Mortgage rates have plummeted until now, with buy-to-let investors benefiting from competitive pricing. However, the buy-to-let market expects a flash flood from now until April – so behaviour in the market becoming increasingly unpredictable. Now is the best time to fill your boots in preparation for the changes to come!