Bank of England Base Rate cut by 0.5%. How will this effect Buy to Let? 08.01.2009

Author: Michael Aglony Posted on: 08 January 2009

Good Afternoon and a belated Happy New Year!

So, the Bank of England has announced a further 0.5% cut in the Base Rate. Rates are now at their lowest for 300years and could still go lower.

Liquidity in the Banking sector remains an issue but despite what you may hear, lenders are lending and we are seeing an increase in the number of Buy to Let mortgage products available. As a guide, before the last Base Rate cut, our internal sourcing system Mortgage Flow was showing c80 products available. Today there are in excess of 120 products and we would expect a raft a new products shortly as lenders take into account the latest reduction in the cost of borrowing.

As an example, one lender this week has already launched a couple of 1 year products. A 1 year fixed at 3.49% and a 1 year tracker at Base + 1.99% - both with a fee of 3.5% added to the loan. Expect further buy to let fixed rates to be available over the coming weeks and please keep an eye on our website which keeps all product information up to date and in real time. (All rates were updated within 5 minutes of today’s Base Rate reduction!).

Our website will also keep you updated on the movement of 3m LIBOR rate which has steadily reduced in anticipation of today’s Base Rate cut. The good news is that the gap between Base and 3m LIBOR continues to narrow with the spread only 50bps before today’s announcement (compared to a gap of 118bps in Nov and 79bps before December’s cut). The reduction in LIBOR along with the implementation of the various Government initiatives will improve confidence and liquidity amongst the lenders which in turn will lead to an increase in available mortgage options.

We will continue to keep you updated. In a complex market it has never been more important to get the right advice about your mortgage options – our Consultants are on hand to assist you and keep an eye out for further Buy to Let Blogs and e-mails over the coming days and weeks.