Lenders are capping rate rises

Lenders are absorbing more costs to keep their buy-to-let rates competitive, according to data just released. Buy-to-let (BTL) lending margins have been squeezed throughout 2017, according to the latest results of the BTL Mortgage Costs Index.

BTL lenders, whose margins have been diminishing since July 2016, chose not to pass on the increases to borrowers. Instead, it seems they opted to squash their margins further, as they competed for every customer in light of the year-end lending targets.

The data revealed that, between the beginning and the end of 2017, average lender margins over swaps had declined by 0.53% points.

It is very unlikely that lenders will consider lowering rates again. If anything, we would expect them to find ways of making up for the lost margins.

The index also revealed that the effect of fees remained largely unchanged quarter on quarter, adding an average of 0.62% to the headline rate advertised to borrowers – the lowest amount since the beginning of 2013 when the index started tracking this data. Fees include lender arrangement fees, valuation fees and legal costs.

To meet targets, lenders increased the number of BTL mortgage products without arrangement fees to the detriment of products with fees calculated as a percentage of the loan amount.

On reflection of the recent data published it would seem that interest rates will only be going one way in the near future. If you have a current BTL mortgage and you have not reviewed it lately it would seem a very good idea to get it checked now.

If you would like to review your current mortgage deal, please make contact and one of our qualified advisers will be happy to help.