BUY-TO-LET MORTGAGE RATES FALL BELOW 2%

As the buy-to-let market continues to boom, a record low landlord loan has been introduced that sees mortgage rates for the scheme fall below 2% for the first time.

Thanks to Accord Mortgages, the brokering arm of the Yorkshire Building Society, the fixed rate for a buy-to-let mortgage has dropped to just 1.84% on a two year fix, and is available to either new borrowers or those looking to re-mortgage on a 40% deposit.

The only downside for landlords of this exceptionally low rate is that Accord requires a substantial £2,625 fee in addition, though for many this will be seen as a small price to pay. For landlords able to raise the necessary deposit, the deal on offer could fix monthly payments on a £150,000 interest-only mortgage for two years at a highly attractive £230 per month.

To put this into context, a first-time buyer looking to step onto the ladder at exactly the same rate would find it almost impossible to borrow interest-only, and would likely be looking at monthly payments of £628 in comparison. It is a reflection of the massive rise that the buy-to-let sector has seen, due in equal parts to low interest rates and higher rents.

Whilst the sector seems in good health at present, there are fears that this will change once certain tax relief and allowances are removed, as was proposed by the Chancellor of the Exchequer earlier in the year. With that in mind landlords have had to focus on keeping costs down. In 2011 the lowest rate available to landlords on a fixed buy-to-let loan would have been 3.25%, followed by 2.99% in 2012 and 2.49% in the following two years, showing a steady but noticeable decline for landlords to take advantage of.

Accord Mortgages have broken through the 2% barrier to reach 1.84%, combining their low rate with a £2,495 fee and £130 application fee for a total of £2,625 overall. On a 25 year £150,000 interest-only mortgage this would combine to a total cost of £8,145 over the two year period. Their closest competitor is NatWest who pitch their rate just above at 2.02% but with a much lower £1,995 additional fee, meaning that over the same period on the same interest-only mortgage the total costs would reach a slightly lower £8,055.

At Orchard and Shipman we work closely with landlords to make sure that they are getting the most out of their investments. When it comes to the property rental market it is important to know what your home is worth and where to find the ideal tenants. The sector is booming and letting a property can be the ideal form of additional income. Whether you are looking to buy in a ‘hotspot’ area, or somewhere you feel has potential, contact Orchard and Shipman to find out exactly how much you could earn by working with us. Wherever you are considering buying, we are always looking for landlord partners, so call your local Orchard and Shipman property experts today.