Despite buy-to-let mortgage rates being largely unaffected by swap rate rises last year, there is likely to be an increase in 2017 as lenders factor in affordability checks.
Mortgages for Business said the reason why lenders failed to raise buy-to-let rates in line with swap rate rises last year was mostly due to the Bank Rate remaining at a record low of 0.25%.
Its Buy-to-Let Mortgage Costs Index revealed that towards the end of December there was a temporary drop of 0.3% in the average rate of high loan-to-value fixed rate buy-to-let mortgage products.
The index also found that rates for low LTV trackers remained comparatively expensive, averaging 5.17% in the quarter.
Mortgage rates are largely determined by swap rates – the cost of fixed-rate borrowing by lenders.
Following the Brexit vote in June, swap rates plummeted, sending mortgage rates to record lows.
David Whittaker, CEO of Mortgages for Business, said: “With demand in the buy-to-let sector already under pressure from both fiscal and regulatory changes it is good to see that lenders have not further burdened landlords by increasing interest rates.
“However, with rising swap rates this situation cannot continue forever and we would expect to see increases at some point in 2017 as lenders factor in the additional time spent on deeper background checks and assessing affordability, particularly from landlords borrowing in a limited company capacity.
“Whether increases happen before 1 October when lenders will be obliged to be extra vigilant while assessing applications from portfolio landlords remains to be seen, but we will be watching the market closely in this respect.”
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