Warnings Over Possible Buy to Let Mortgage Rate Rise.

by Mark Johnston

Warnings Over Possible Buy to Let Mortgage Rate Rise.

Despite recent reports of improved levels of lending activity in the mortgage and housing market, demand from tenants has remained steady as the cost of purchasing a home remains out of the grasp of many would be buyers.

So it seems that the continued high demand for rental accommodation has provided the buy to let mortgage sector with a much needed boost over the past couple of years.

interest-rates-headline1The private rented sector has grown by 72 per cent since 2001 and there are now over nine million people in England renting privately.

Recent data has shown that the number of buy to let loans being taken out is at its highest level in four years. Around £1 in every £7 lent on mortgages last year went to landlords, which amounts to a total of £16.4 billion.

According to Moneyfact, a comparison website, mortgage lenders have also increased their buy to let product ranges, with a total of 468 buy to let mortgages available at present, compared with just 268 in July 2010.

Landlords, along with other buyers, have in the past year benefited from the Government’s Funding for Lending Scheme.

The Mortgage Works, a subsidiary of Nationwide Building Society, has currently launched its lowest ever fixed rate deal with a rate of  2.49 per cent and this particular deal is available to both first time and experienced landlords.

Therefore this particular mortgage deal is  the current best buy rate for landlords.

Henry Jordan, managing director of The Mortgage Works, said “these changes further demonstrate our steadfast commitment to the buy to let sector, with landlords being able to secure market leading headline rates across all of our loan to value tiers up to 80 per cent.”

The Landlord Centre, the online buy to let mortgage specialist, has also recently launched two new exclusive buy to let mortgages.

The first, from Melton Mowbray Building Society, is a 2.55 per cent fixed rate until September 2015 with a £2,495 completion fee and the second is from Hinckley & Rugby Building Society with a 2.55 per cent two year discount mortgage with a two per cent completion fee. Both are available up to 60 per cent loan to value (LTV).

However, a report, published by Mortgages for Business, warned that Rates on buy to let mortgages are set to rise in coming months

Fixed rate mortgage pricing is heavily influenced by “swap rate” markets. This is where banks, building societies and specialist lenders borrow tranches of money over a fixed period to lend on to consumers at a profit. These swap rate markets had been steadily falling for years until several months ago.

David Hollingworth of London & Country, a mortgage broker, said: “The pressure from higher swap rates has been there for a little while now and people have been worrying about it but significant rate rises have not come to pass yet.”

It appears then that some buy to let lenders will look to increase longer term fixed rates in order to re-establish their lost margins.

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