An increase in the cost of longer term swap rates has led to a rise in three and five year fixed rate buy-to-let mortgages, latest research from Mortgages for Business has found.
Despite this, the increases have been tempered by market competition and the effects of the Funding for Lending Scheme.
The research found that buy-to-let mortgage costs have increased by around 0.25 percentage points to an average of 5% for five-year products and 5.25% for three-year products since May. Tracker rates have not been affected.
David Whittaker, managing director of Mortgages for Business, said: “To date the increases have been nowhere near as large as the increases in the underlying swap rates which have risen by around 0.5 percentage points for three year swaps and 0.9 percentage points for five year swaps.
“It’s good news for investors because it’s a positive sign of increasing market competition and shows the effects of the Funding for Lending Scheme is filtering through. Of course, at some stage it is likely that lenders will play catch-up and these rates will go up but when this will happen is anybody’s guess.”
The report entitled Buy to Let Mortgage Rates: The Real Costs (Q3 2013) also shows a very small rise in the cost of fees (lender arrangement, valuation and legal) which added an average of 0.52% to headline cost of a buy to let mortgage, up from 0.50% in Q2 2013. Looking at the annual effect of costs since 2008, it would appear that costs are now stable at around 0.5%.
The report also shows that whilst flat fees make up half of all lender arrangement fee structures, there was a 3% increase in the number of percentage based fees (of between 1-3%) which now account for 43% of all lender arrangement fees. For the second quarter in a row only 7% of products were fee-free.
The average flat lender arrangement fee in Q3 2013 was £1,511, down just £2 on the previous quarter, a tiny but encouraging reduction in the investor’s favour.
