Buy-to-let mortgage rates set to rise, landlords warned

Published by Daniel Jones

Landlords looking at buy-to-let mortgages have been told that rates on these products are set to rise in the coming months. A new study by Mortgages for Business said that recent comments from central bankers, regarding an improvement in the economic situation in the UK, will soon have an effect.

The report was cited by the Daily Telegraph and revealed that the steady drop in rates over recent times appears to have halted and five-year fixed deals are now around 0.2 per cent higher than what they were at the end of May.

One of the biggest influencers when it comes to fixed rate mortgages is swap rates, which are where banks, lenders and building societies borrow money over a period of time to borrow to customers at a profit.

However, because of signs that the economy is now picking up these rates have shot up, with five-year swap rates going from 0.91 per cent to 1.85 per cent between early May and late June.

This was mainly due to comments from US Federal Reserve chairman Ben Bernanke revealing that there will soon be a tapering of its programme of stimulus for the economy.

"The increase in swap rates has not yet been matched by an equivalent increase in the cost of fixed rate mortgages and at the three and five-year levels, margins over swap rates have declined. Whilst this is doubtless being assisted by the effect of the Funding for Lending Scheme, it seems unlikely that lenders will not seek to re-establish some of this margin over the months ahead," the report from Mortgages for Business read.

The company has also revealed that the gap between 65 per cent and 75 per cent loan to value buy-to-let rates has narrowed over the past 18 months.

This is good news for residential property investors as it shows that there lenders have a good appetite for higher LTV deals at the moment.ADNFCR-1645-ID-801617173-ADNFCR

Published on: July 26, 2013

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