The amount of arrangement fee-free buy-to-let mortgage products increased in the third quarter (Q3) of this year, revealed data from Mortgages for Business (MAB).
The figures from the latest Buy-to-Let Mortgage Costs Index show that 17% of products in Q3 were offered without lender arrangement fees, up from 13% in Q2. Flat fee products dropped slightly from 47% of all buy-to-let mortgages to 46% over the same period.
The greatest declines were experienced on products with percentage-based fees, falling from 40% of all buy-to-let products in Q2 to 37% in Q3.
Charges, including arrangement fees, valuation fees and legal costs, have continued to have a negative impact on total costs. On average, they now add an extra 0.48% to the headline rate, down from 0.52% in Q2. When the index first launched however, in Q1 2013, the average was 0.67%.
These decreases were also witnessed in the high loan-to-value (LTV) sector, which has previously seen an average 0.9% added to the headline rate. In Q3 2015, the average additional cost on high LTV rates was down to 0.67% after three consecutive falling quarters.
The study also found that despite absolute product numbers by initial term – one to five-year rates and loan term products – rising across all categories, the market share of two-year loans has dropped annually from 54% in Q3 2014 to 43% now.
Longer term products, especially three and five-year rates, have increased their market share, gaining 9% of the market between them.
Finance Director at MAB, Simon Whittaker, comments: “The recent falls in swap rates, almost back to levels similar to the start of the year, have helped lenders trim prices, but whilst they continue to be attracted to the buy-to-let space, they are having to be ever more creative to find the balance between maintaining their margins and offering competitive products.
“When looking at the market and the wider economy, the balance seems to have tilted towards there being no increase in bank rate for quite a few months yet.”1
1 https://www.landlordtoday.co.uk/breaking-news/2015/10/fee-free-btl-products-increase