Lenders reduce their BTL margins to keep pricing competitive as pricing falls on BTL products available to Ltd companies and the number of arrangement fee free products increases.
Pricing of five-year fixed rate buy to let mortgage products continued to decline in Q1, despite a steady increase in five-year swaps, suggesting that lenders chose to reduce their margins to remain competitive.
These cuts are amongst the Q1 2018 findings of the new Buy to Let Mortgage Index published today by Mortgages for Business which also reveals that the costs were absorbed across low, medium and high loan to value products, making five year fixes even more attractive to landlords seeking certainty over their outgoings in the longer term.
Lenders also absorbed more costs across two and three year fixed rate products.
Over the quarter, the average pricing of rates available to landlords borrowing via limited companies also fell except on five-year fixed rates which increased by 10bps from 4.2% to 4.3%.
Although the number of lenders offering products to corporates remained unchanged at 16, the total number of products available increased by 1%, lifting availability to 25% of the entire market.
Rates available to limited companies are generally higher than the market average, because the cheapest products are typically offered by lenders without the systems or underwriting skills in place to offer products to limited companies.
The index also found that number of lender arrangement fee-free buy to let mortgages grew for the fourth consecutive quarter. Nearly one fifth (19%) of all products had no lender arrangement fee in Q1, up from just 11% in Q2 2017. 39% of products have flat fees charged at an average of £1,441. On the remaining products, lenders charge an arrangement fee based on a percentage of the loan amount, typically 0.5-3%.
Commenting on the index, David Whittaker, Chief Executive Officer said:
“Change has been the only constant in the buy to let market in recent years so we felt it was time to take a more holistic approach to tracking and analysing industry developments. This new Buy to Let Mortgage Index combines and replaces four previous indices plus our commentary on the money markets.
“Whilst the current picture shows that lenders and landlords have much to accommodate, the data reveals that slowly, both are moving towards solutions which should keep buy to let a popular if less prolific investment in the years to come.”
The Buy to Let Mortgage Index
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