Research by specialist broker Mortgages for Business has revealed that during the first quarter of 2013 buy to let rates fell by an average of 0.33 per cent when factoring in fees.
Two year fixed rate products at 65 per cent loan to value (LTV) fell the most by 0.69 per cent over the quarter and now stand at an average of 5.27 per cent including fees. In general, two year rates to 75 per cent LTV have fallen sharply compared to last year.
Commenting on the figures managing director David Whittaker said: “This is good news for property investors looking for finance. It’s interesting to see that the effect of costs on rates are beginning to fall back to their pre-credit crunch level which is a sign of continued market improvement and could be contributing the marked increase of buy to let remortgage activity witnessed in Q1”.
Headline rates (excluding fees and other costs) fell by an average of 0.27 per cent across the same period which, when compared to average rates including fees, demonstrates that overall fees have decreased slightly which is good news for borrowers.
Interestingly the gap between three and five year rates narrowed over the quarter and in many instances five year rates are similarly priced to their three year counterparts. As there are more “specialist” products available in the three year sector, the average cost of three year products can be higher than the average for the five year products.
In Q1 2013 lender arrangement fees, valuation fees and legal costs added an average of 0.52 per cent onto the headline cost of a buy to let mortgage. This has dropped slightly since the beginning of the year when the figure stood at 0.57 per cent. Costs were at a peak in 2010 when across all product types they added an average 0.66 per cent pa to the average cost. Unsurprisingly they have a greater impact on short term (2 year) mortgages where in 2010 they added an average of over 1.1 per cent to annual costs whereas this is now around 0.82 per cent.
Of the buy to let mortgage products available in Q1 2013, 9 per cent had no lender arrangement fee. This figure is up one per cent on the previous quarter. 43 per cent of products had percentage-based lender arrangement fees of between one and three per cent, compared to Q4 2012 when 46 per cent of buy to let mortgage products carried a percentage-based fee. Nearly half (48 per cent) of all buy to let products had a flat lender arrangement fee, up 2 per cent on the previous quarter. The average flat fee is now £1,534, down £24 on Q4 2013. Overall these figures are good news for borrowers and demonstrate that competition between lenders has intensified.
