Last week we heard that the number of loans handed out for house purchases in March rose by 29% on February. That certainly in line with the steady rise in applications being approved. With this in mind, I just want to touch upon the difference in rates/arrangement fees between buy to let mortgages and residential mortgages.

A common comment we get is “why are buy to let mortgages still in the 5% plus bracket with 2.5% arrangement fees, when base rate is 0.5% and residential rates are 4%?”. It’s understandable to be irked by this, but it now has to be put into the context of the current market conditions.

Here’s my 10 second view:

• Compared to a year ago, buy to let rates are actually quite low.
• Buy to let mortgage products are perceived as higher risk by the lenders and therefore priced accordingly.
• Lack of competition in the market means there is no impetus to chase market share, there are simply less lenders willing to lend on buy to lets.
   

The fundamentals have changed and we are going back to the early 2000s when buy to lets were treated as a semi-commercial product, with the associated greater costs.

Of course, what I would also say is that it’s still a superb time to buy if you’re able. Prices have gone down and mortgage rates have gone down, therefore yields are looking better. At some point in the next few months prices will also stabilise.

Tip of the week

That would your mortgage portfolio do if you died? Would they allow your spouse/partner to continue with your mortgages? Well, the answer is - not necessarily.

So you may be sitting on a cash flow positive portfolio (for now), but if the lender called-in their loans, would your partner be able to remortgage away from your current lender? In many instances, that would be NO.

In these uncertain times, the savvy investor is protecting their investment with a number of different techniques and often for no extra cost. You’ve probably got life policies and various insurances built up over time that cost you money each month but you don’t even know what they are for! Most life insurance schemes, for example, have actually fallen in cost over the past year.

Our property investor focussed brokers can review your current situation and offer advice and ideas on how to help protect your investment – just give us call.

01424 205373

John