Buy to let mortgage rates have hit a record low, offering a brief respite from the recent bad news in the buy to let sector.
The increase in stamp duty, coupled with changing tax rules and a more stringent borrowing criteria have made it an increasingly tough market for buy to let landlords. However, good news has come in the form of the latest figures from the Bank of England, which revealed that the average buy to let deal has fallen more than 0.5 per cent in the last year.
The standard two-year fixed-rate buy to let mortgage deal reached a record low in February, with the average rate now 2.76 per cent. This is down from the 2.82 per cent recorded in January. February’s marks the lowest of the mortgage rates seen in the past year, however, more shockingly the lowest rate since the bank began recording rates in January 2012. Just one year ago, landlords were paying an average of 3.29 per cent.
However, another path for landlords is to opt for a longer-term fixed rate deal. Many lenders do not apply the ‘rental income ratios’ to five-year deals, due to the fact that the Prudential Regulation Authority rules only require that lenders must test the ability of an applicant to meet increased mortgage payments in the next five years. The ruling thus avoids rates which stand for five years or longer. Furthermore, five year deals can offer a respite from the high arrangement fees often associated with two year deals.
Mortgage expert Steve Olejnik, commented on the new two year rates, saying: ‘While these falls do not entirely mitigate the financial impact of the regulatory changes to the sector, they do provide some breathing room.’