Will 15 year fixed rate btl mortgage change investors strategies?
Mortgages for Business, the leading UK specialist Buy to Let mortgage broker, is offering a new 15 year fixed rate portable Buy to Let mortgage.
This new mortgage product marks a shift by lenders in recognition that buy-to-let market conditions are changing, with the market now dominated by portfolio investors who, according to Association of Residential Letting Agents (ARLA), have no intention of selling their property for at least 17 years.
Previously the maximum term available for a fixed rate buy-to-let mortgage was 10 years. The 5.99 per cent 15 year product has been launched by specialist lender The Mortgage Works, and is offered through Mortgages for Business.
Jonathan Moore, head of marketing at Mortgages for Business, said: “This mortgage is rather clever as it is portable. This means that it can be moved between properties should an investor decide to sell and buy a new property.”
Mortgages for Business expects that the mortgage product will suit cash-rich or inactive investors who choose not to regularly remortgage properties in their portfolio in order to raise capital to fund further purchases. Remortgaging is the cornerstone of a portfolio building strategy allowing investors to release equity from capital appreciation to invest in further properties
“We applaud the idea behind this new mortgage product and we expect it to be attractive to some investors,” says Moore. “Lenders are responding to changing conditions by developing new and innovative products that appeal to different, and often smaller, market segments. However we would expect that the large majority of investors will continue to favour buy to let fixed rates of three years or less.”
Long-term fixed rates have been widely supported by the government in the residential mortgage sector. However they have remained unpopular with borrowers who find it difficult to judge value over such a long period. Long-term fixes can also be constraining because they do not allow for changes in personal circumstance or, in the case of Buy to Let, landlords’ changes in investment ambition.
“From our experience most investors do not wish to fix beyond three year because it is almost impossible to predict what will happen to SWAP (the basis of fixed rates) and money markets much beyond this horizon. However there is certainly a niche market for this groundbreaking product” adds Moore.
