The real cost of buy to let mortgages fell by 0.33% in the first three months of 2013 and the gap between three and five year rates narrowed, new research shows The data from specialist broker Mortgages for Business reveals that two year fixed rate products at 65% LTV fell the most by 0.69% over the quarter and now stand at an average of 5.27% including fees. In general two year rates to 75% LTV have fallen sharply compared to last year.
‘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 to the marked increase of buy to let remortgage activity witnessed in the first quarter,’ said the firm’s managing director David Whittaker.
Headline rates, excluding fees and other costs, fell by an average of 0.27% 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. The data also shows that 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.
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In the same period lender arrangement fees, valuation fees and legal costs added an average of 0.52% 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%. Costs were at a peak in 2010 when across all product types they added an average 0.66% per annum to the average cost. The firm pointed out that they have a greater impact on short term mortgages where in 2010 they added an average of over 1.1% to annual costs whereas this is now around 0.82%.
Of the buy to let mortgage products available in the first quarter of 2013, 9% had no lender arrangement fee which is up 1% on the previous quarter. Some 43% of products had percentage based lender arrangement fees of between 1 to 3% compared to the fourth quarter of 2012 when 46% of buy to let mortgage products carried a percentage based fee. Nearly half, 48%, of all buy to let products had a flat lender arrangement fee, up 2% on the previous quarter. The average flat fee is now £1,534, down £24 compared with the fourth quarter of 2012.
It concluded that overall these figures are good news for borrowers and demonstrate that competition between lenders has intensified.