Posts with tag: mortgage rates

More landlords looking to extend BTL portfolio

Published On: May 28, 2015 at 2:54 pm

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Categories: Landlord News

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A report from the buy-to-let broker Mortgages for Business suggests that existing buy-to-let landlords will look to extend their existing portfolios during the rest of 2015.

Hunting for deals

The findings from the survey indicate that 65% of UK landlords questioned in April said they were looking to buy at least one more property within the next six months. This is in comparison to 55% last November.[1]

Additionally, only 8% of landlords said that they were currently looking to sell a property, whereas 27% said they intend to keep their existing portfolio for the duration of the year.[1]

David Whittaker, managing director of Mortgages for Business, commented that, ‘landlords are better capitalised and now more confident for reinvesting.’ He believes that a, ‘strong rental market is being driven by tenants moving to make the most of job opportunities and now gradually starting to earn more too.’[1]

Whittaker continued by saying that this, ‘new surge of demand is putting more upwards pressure on rents and landlords are only just beginning to supply more homes to let in response. On top of this, after the surprise stability of a majority government, landlords will almost certainly see a short-term boost of house price growth-while the threat of damaging regulation has been lifted for at least the next five years.’[1]

Financing

Findings from the report also showed that landlords are changing tact when choosing how to finance borrowing. 26% of landlords said that they would like a variable rate for new buy-to-let mortgages, rising from 23% in November. With this said, deciding to set repayments for a short time is less popular than six months ago. 22% of landlords said that they would go for a two-year deal, in comparison to 23% last year. 12% said that they would choose a three-year fixed deal, down from 15% in November. Comparatively, long-term mortgages have gained in popularity. 10% of landlords said that they would go for a ten year fixed rate mortgage, up from 8% six months ago.[1]

Landlords’ average loan-to-value ratios have dropped to 54% from 57%. Furthermore, the number of landlords with borrowing over 75% LTV has dropped to 12% from 16% six months ago. 81% of buy-to-let landlords have borrowing costs less than 75% LTV.[1]

More landlords looking to extend BTL portfolio

More landlords looking to extend BTL portfolio

Whittaker explains that, ‘over the medium term, interest rate expectations have never been friendlier to landlords. This is clearly reflected in the proportion willing to eschew guaranteed stability in favour of some immediate savings. Over a two year period this may be rational and landlords as a whole don’t tend to take extraordinary risks with their financial position.’[1]

He believes that, ‘over the longer-term, the stability of a fixed rate is likely to pay off and given how five year fixes are barely more expensive than some variable rates we maintain in our existing advice to fix now if it fits with a landlords’ investment plans over the next five to ten years.’[1]

More support

Disappointingly, just 30% of landlords believe that lenders are doing enough to support property investors. 20% said that they felt mortgage lenders should be lending them a greater amount and another 20% felt that lenders should reduce rates further, despite record-low rates already being recorded.[1]

However, by far the greatest demand from the landlords questioned is that lenders ease lending criteria. 57% said that lenders should be less picky in their selection of borrowers.[1]

Whittaker concluded by saying, ‘buy to let mortgage lending is a relatively new aspect of finance, only really defined in its modern form for a couple of decades.  But as the financial world evolves certain safe-guards tend to be proven ineffective or irrelevant – and the same is true for buy to let.’

‘For example, it is hard to prove who is on average the better borrower: a professional landlord with three properties but a minimal external income, or a part-time landlord with one investment property but a well-paid job. Lenders are still adapting and improving their models for these things. But property investors are understandably annoyed when their personal circumstances aren’t taken into account, and good lenders won’t want to avoid too many borrowers unnecessarily.’[1]

 

[1] http://www.propertyreporter.co.uk/landlords/two-thirds-of-landlords-now-planning-to-buy-new-btl-properties.html

 

Lowest Ever Mortgage Rate

Published On: May 24, 2015 at 4:24 pm

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Categories: Finance News

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Mortgage lenders have been competing for the lowest rates, causing one to offer a record low 1.07% rate.

Lowest Ever Mortgage Rate

Lowest Ever Mortgage Rate

Yorkshire Building Society has released a two-year fixed rate deal at the lowest ever rate offered in the UK, revealed experts.

Moneyfacts’ Rachel Springall says: “There’s a real fixed-rate war going on at the moment. A lot of people were saying, ‘It’s not going to go below 2%’, but that happened months and months ago. It’s highly likely that someone will try to undercut it.”

The price war is the result of record low base rates of 0.5% and arrives soon after the UK dropped into negative inflation for the first time since 1960.

However, Yorkshire Building Society’s deal requires a 35% deposit and has a fee of £1,369.

Earlier in May, the Co-operative Bank launched the former lowest ever mortgage rate of 1.09% with a 40% deposit and £1,499 fee.

Springall continues: “Borrowers need to be aware of the full cost of a mortgage. With arrangement fees and booking fees after two years, it’s likely to be twice the amount.

“Borrowers need to see the true costs and seek out advice, because otherwise their costs could go through the roof. But it’s easy to move mortgages and it’s easy for consumers to see the deals out there.”1

1 Yeatman, D. (2015) ‘Lowest-ever rate on offer to homebuyers’, Metro, 22 May, p.2

Record Low Mortgage Rates Disappear

Published On: May 20, 2015 at 9:46 am

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Categories: Finance News

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Those buying a home with a mortgage have run out of time to take advantage of the lowest ever long-term fixed rates.

Mortgage lenders have started taking their cheapest deals off the market, driving the best rates on a five-year fix over 2% again. The lowest five-year fixed rate mortgage is now 2.14%, up from 1.99%.

Lenders have been competing recently for the best offers on fixed rates. HSBC introduced a record low five-year fix of 1.99% in April, but this has since disappeared.

Woolwich also launched the same rate for a limited time last week, but this expired today.

Record Low Mortgage Rates Disappear

Record Low Mortgage Rates Disappear

These deals have been pulled due to the cost of funding on the wholesale markets – known as swap rates – increasing recently. Lenders use these rates to price their mortgages and they have a huge impact on the cost of lenders’ fixed rate mortgage funding.

In the middle of April, swap rates dropped to 1.46%, but reached 1.73% last week before declining again to 1.66%.

Swap rates are climbing after the bond markets became chaotic. Yields on UK Government bonds, called gilts, have been driven up.

Lenders will also bear in mind that the Bank of England’s (BoE) latest inflation report claims interest rates will increase in mid-2016.

The best rates

After Woolwich pulled its 1.99% five-year fix today, Chelsea Building Society now has the best deal, a 2.14% rate with a 40% deposit and £1,675 fee. A 25-year £150,000 mortgage on this would cost £646 per month and £40,438 over the five years.

If borrowers are looking for smaller fees, Yorkshire Building Society offers a 2.19% rate with a £975 fee. On the same mortgage, this would be £649 a month, but £479 cheaper over the five years at £39,959.

Yorkshire Building Society has also released a range of fee-free mortgages this week, with £1,000 cashback. Borrowers could get a five-year fix at 2.54% costing £675 per month on the average home loan and £40,557 over the term.

This deal becomes cheaper than the others when considering the cashback, which takes the overall cost down to £39,557.

For borrowers with smaller deposits, Post Office Money has a five-year fixed rate at 2.49% with a £999 fee and 25% deposit. A 25-year £150,000 mortgage would be £672 a month and £41,329 over five years.

Leek United offer a 3.59% rate for a £495 fee and 10% deposit. This would cost £758 per month on the same mortgage and £45,986 for five years.

The Help to Buy mortgage guarantee scheme provides a five-year fix from Post Office Money at 4.89% with no fee. The same mortgage would cost £867 a month and £52,037 over five years.

 

 

 

 

Homeowners can save £12,000 in five years

Published On: April 29, 2015 at 3:07 pm

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Categories: Finance News

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An astounding new report on the impact of low-mortgage rates has been revealed, just a week before the country heads to the ballot box.

According to new findings, homeowners can potentially save in excess of £12,000 more than five years ago, by remortgaging onto one of the many competitive deals in todays market

Tumbling mortgage rates have led borrowers to be able to secure a saving of £12,434,40 on a fixed-rate, five-year deal compared to the same deal five years ago.[1] With the cost of living prominent in the election battle, these figures may sway many borrowers to vote Conservative.

Better off?

However, Rachel Springall of financial organisation Moneyfacts.co.uk, believes that borrowers’ gain has come at the cost of savers’ pain. Springall said that, ‘as the fifth year approaches since the last General Election, we have seen many changes to the economy, but consumers will be questioning whether they really are better off. While borrowers have seen positive changes, this has ultimately come at a cost to savers who lose out on decent returns.’[2]

Borrowers have been able to save more money due to mortgage rates reaching an all-time low. This can be attributed to the Bank of England keeping rates at just 0.5%. Additionally, more attractive Government initiatives can also be seen as a solid reason for the drop in mortgage costs.

One of the most prominent Government initiatives is the Help to Buy scheme, which has been invaluable allowing many first-time buyers to overcome the barrier of raising a deposit.

Homeowners can save £12,000 in five years

Homeowners can save £12,000 in five years

Lowest rates

As a result of increased mortgage activity, banks have produced their most competitive rates to try and reach their lending quotas. HSBC has recently introduced their lowest ever five-year fixed rate mortgage, at just 1.99%. However, restrictions are in place, with the rate only available to those with at least a 40% deposit. The rate also comes with a fee of £1,499.[3]

Jonathan Harris, of mortgage brokers Anderson Harris, acknowledges that, ‘the last five years have been particularly kind to borrowers with interest rates stuck at a record low of 0.5%.’ Furthermore, Harris said that, ‘those on base rate trackers or even a cheap standard variable rate have benefited, as have those taking out a cheap fixed rate deal.’[4]

Harris believes that, ‘the benefits of cheap interest rates and Government initiatives will be felt for a long time to come if borrowers opt for a medium-term fixed rate.’ With rates under 2% for a fixed term of five years, Harris stated that is, ‘astonishingly cheap for protection from interest rate rises for a reasonable period of time.’[5]

He went on to conclude that, ‘borrowers have never had it so good’ but warned that lenders face tighter affordability criteria with the introduction of the Mortgage Market Review.[6]

[1-6] http://www.zoopla.co.uk/discover/property-news/how-can-homeowners-save-more-than-12-000/?utm_content=buffer7385b&utm_medium=social&utm_source=twitter.com&utm_campaign=buffer#UETtCK0Sjux51qKz.97

 

 

Buy-to-let boom won’t last

Published On: April 4, 2014 at 4:12 pm

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The start of the new financial year has led many to predict that the Bank of England will shortly decide to increase interest rates.

Record Low

Interest rates have been at an all-time low for over five years. With the economy showing small shoots of recovery, many are forecasting rises during the coming twelve months

If the anticipated rise does occur, it will be interesting to see the impact for those in the buy-to-let and rental market.

Extending

Luke Gidney, director of award-winning letting agency Let-Leeds, said that the rental sector has benefited hugely from the low interest rates of previous years. Gidney said there was no surprise that a recent survey showed that, ‘57% of landlords expect to expand their property portfolios in 2014.’ He continued, saying, ‘with mortgage lenders having lowered their buy-to-let mortgage rates and one in six people now living in private, rented accommodation, the rental sector looks set to increase in size.

‘From our experience, buy-to-let activity has certainly been on the increase over the last six months.’[1]

Unsustainable

Despite increased activity, Gidney believes that it has not been easy to sustain in certain areas. Taking Leeds as an example, he says, ‘in this city, there is a shortage of what you might call typical buy-to-let stock. By this, I mean the small, one or two-bedroom flats and houses that can be bought for £125,000 or less. It is hard to find this type of housing – the type that is generally classed as good investment property. And in a city like Leeds that has had a marked effect on the property sector.’

Buy-to-let boom won't last

Buy-to-let boom won’t last

 

 

‘For a start, the scarcity of the buy-to-let type of property has led to a sharp increase in the price of many small houses and flats.’

‘The old economic principle of prices being pushed up when demand outstrips supply certainly seems to be the case in the city.’

‘This has been exacerbated by the impact of low buy-to-let mortgage borrowing rates. Such rates mean that there are higher rental yields to be made on such properties.’

‘So when you combine low mortgage rates with high rental yields and a shortage in suitable housing stock, it is no great surprise that prices are going up.’[1]

Wise

Mr Gidney said that smart investors had cashed in on the fruitful buy-to-let market. He suggests that wise investors, ‘have done the calculations, have worked out the conditions are right for making a tidy sum and have hunted down the right properties.’ Gidney went on to say,’ The fact that such properties are in short supply has led to prices going up and auction rooms across the region becoming stuffed full of investors – all of whom are looking to snap up buy-to-let properties to increase the size of their portfolios.

“When you add to this both the fact that buy-to-let mortgages are currently quite easy to obtain and the incredibly buoyant state of the rental market, it is clear that the conditions are all in place for the current trend to increase.’[1]

Caution

Despite the signs of positivity continuing in the buy-to-let market, Gidney warns that it would be, ‘wrong to assume that this can continue for ever.’ He suggests that, ‘an increase in mortgage rates could see the feeding frenzy for buy-to-let properties end suddenly.’ Furthermore, Mr Gidney belives that, ‘if the prices of potential buy-to-let properties rise too high they will cease to be a worthwhile investment for the landlords who are currently doing all they can to increase the size of their rental portfolio.’[1]

[1] http://www.yorkshireeveningpost.co.uk/news/business-news/property-news/leeds-proprty-news-buy-to-let-boom-won-t-last-forever-1-6539353

 

 

Santander Breaks the Trend

Published On: November 29, 2013 at 3:53 pm

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Recent months have seen landlords being unfavourably affected by a sudden rise in interest rates on their mortgages. The Bank of Ireland case, in which they increased the margin differential on their lifetime tracker mortgages, has been particularly exposed.

Many banks have moved away from lending for buy-to-let purposes on account of the risks involved in letting private properties. Recent reports, however, have revealed that Santander have broken the trend and loosened their criteria for landlords. This is to open up to amateur landlords.

Santander Breaks the Trend

Santander Breaks the Trend

Santander’s director of retail assets, Phil Cliff, discussed the new measures, saying: “The buy-to-let market is continuing to see strong growth and the latest improvements to our criteria herald the next step in our journey to becoming the intermediary partner of choice, demonstrating our continued commitment to this market.

“We’re keen to support the non-professional landlords sector and will continue to review our buy-to-let criteria to ensure we’re offering your clients the right mortgage with features to meet their needs now and in the future.”

The lender has reduced their buy-to-let affordability rate from 6% to 5%. The maximum loan size per property will also be increased, from £500,000 to £750,000 from Friday 27th September.

In addition, the Buy to Let Business Managing Director, Ying Tan, said: “This is fantastic news. Lenders are solely but surely moving more towards larger landlords who have been neglected during the past few years. Santander is one lender that can start to compete with BM and TMW with its balance sheet and proposition. It’ll certainly get business.”1

Under the revised criteria, landlords with a maximum of seven buy-to-let properties will be able to apply for a buy-to-let mortgage with Santander Intermediaries, while those with up to five properties can apply to Santander.

The minimum gross rental income requirement remains at 125% of the mortgage payment. Applicants must already have a residential or buy-to-let mortgage. At least one of the borrowers must be employed and earn over £25,000 per annum. Houses in multiple occupation are not eligible.

Additionally, the lender will also consider applications from those who have a minimum of one and a maximum of ten secured credit commitments at the time of application.

Santander is also launching a range of two-year residential track mortgages available up to 90% loan-to-value, with no early repayment charges.

With a high demand for private rental property, it is unsurprising that Santander aim to take a larger share of the buy-to-let lending market. However there are risks involved. Since the recession, evictions due to rent arrears have increased, meaning that landlords are more likely to miss one of their mortgage repayments without rent guarantee insurance. Any landlord thinking of applying for a mortgage through Santander in the near future should ensure they are financially secure and can realistically afford the repayments.

1 http://www.justlandlords.co.uk/news/Santander-Relaxes-Lending-Criteria-for-Landlords-1780.html