Landlords look to fix for longer

An increasing number of landlords are choosing five-year fixed rate products, according to the latest research.

In fact, 84% of landlords opted for these mortgages in Q4 2018, up from 70% in the previous quarter. In total, 97% now choose a fixed rate.

The popularity of five-year fixed rates is likely linked to less stringent tests and the promise of greater stability in the uncertain economic climate, the firm says.

Whilst for landlords, the preference for five-year rates is both a protective measure and an opportunity to maximise borrowing, from a market perspective, it will reduce the volume of re-mortgaging over the next few years.

Elsewhere in the sector, more than half (55%) of all newly submitted buy-to-let applications are from landlords using limited companies, up from 44% in Q3 2018 – indicating a shift away from borrowing personally.

By value, these applications accounted for 51% of all requested borrowing, up from 39% in the previous quarter. More than half of the buy-to-let lenders tracked now offer products to limited companies.

Experts predict the use of limited companies to continue as landlords adjust their investment strategies to cope with the new tax environment and underwriting guidelines for lenders from the PRA.

The research found that the way lenders charge borrowers has also changed. Nearly half of all products had a percentage-based arrangement fee attached, up from 42% at the beginning of 2018. This is most likely due to the market becoming increasingly specialist in nature.

Loans for specialist scenarios tend to be higher and so lenders are able to claw back some of the margins they have lost through competitive pricing by applying a percentage-based fee rather than a flat fee.

If you would like assistance with your new or re-mortgage please do make contact and one of our advisers will be happy to help.