Buy to let mortgage costs come down

Buy-to-let mortgages are less expensive than they were, with mortgage rates and lenders’ fees both down.

Research by specialist broker Mortgages for Business shows that during the first quarter of 2013 buy-to-let rates fell by an average of 0.33% when factoring in fees.

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.

Headline rates (excluding fees and other costs) fell by an average of 0.27% across the same period.

The gap between three- and five-year rates narrowed over the quarter and many five-year rates are now 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, lender arrangement fees, valuation fees and legal costs added an average of 0.52% on to 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% pa to the average cost.

Of the buy-to-let mortgage products available in Q1, only 9% had no lender arrangement fee. A further 43% of products had percentage-based lender arrangement fees of between 1-3%, and nearly half (48%) of all buy-to-let products had a flat lender arrangement fee.

The average flat fee is now £1,534.

The research also shows that in the first quarter of this year, there were 434 buy-to-let mortgages available from 27 lenders.

Peter Lawrence at Lawrence Rand said: “This is good news for investors but also demonstrates the need to take professional advice when considering mortgage borrowing as the range of schemes available is vast.

At Lawrence Rand our mortgage advisers will be pleased to tailor a scheme to suit your personal circumstances.”