Big boom in new BTL mortgage products

Big boom in new BTL mortgage products

The number of five year fixed rate buy to let mortgage products available to borrowers has more than doubled since 2012 says Mortgages for Business. 

In the second quarter of 2014 there were an average of 128 five year fixed rate buy to let mortgage products available compared to just 50 in 2012.


The research found that the increase in the number of longer term products has been at the expense of one-year rates which have really fallen out of favour with the market as a whole. In 2010 one-year products accounted for 18% of the market. By Q2 2014 this figure had dropped to just one per cent and may be a sign that they will disappear altogether at some point in the not too distant future.


The Index also tracks the effects of changes in the money markets. Over the quarter, two and three year swap rates moved 0.2 per cent higher, five year rates increased by 0.1 per cent and 10 year rates have scarcely moved. These movements have not been sufficient to affect a rise in buy to let mortgage rates. In fact, there was a general reduction of 0.1 per cent across most BTL product ranges in the highly competitive 75 per cent LTV sector.


With the expectation of a steady increase in rates over the next five years, it would be reasonable to assume that tracker rates would be cheaper than fixed rates; however, the research found that this is not the case. Three and five year fixed rates generally cost little or no more than their tracker counterparts giving borrowers even more of an incentive to switch to fixed rate buy to let products sooner rather than later.


The effect of fees on pricing held steady, adding an average of 0.54 per cent to the cost of taking out a BTL mortgage.


The spread between fee types also change very little in Q2 2014, although there continues to be an incremental movement away from percentage based fees (typically one to three per cent) in favour of flat fees. The average flat fee currently stands at £1,421 down form an average of £1,498 in the previous quarter.