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Are Buy-to-Let Mortgage Rates on the Rise?

Find out how rising interest rates on buy-to-let mortgages are affecting homeowners and what they can do about it.

Are Buy-to-Let Mortgage Rates on the Rise?

The average number of fixed two-year purchase-to-rent mortgage offers has increased by 1.63 percentage points compared to two years ago, according to Moneyfacts. Interest rates on purchase-to-rent mortgages are typically higher than those of a standard residential mortgage, although they have been declining in recent years. Figures shared with The Guardian show that the number of new purchase-to-rent mortgage offers available has plummeted by 55% in less than a week, as lenders frantically recalled products and, in many cases, increased prices. This has been affecting mortgage rates, and homeowners are taking notice. The average purchase-to-rent mortgage rate is now around 401% for a two-year fixed rate.

The costs of buying and renting fixed-rate mortgages have increased significantly and more increases are likely to occur if, as expected, the Bank of England raises the base rate for the fifth consecutive month next week. The online purchase-to-rent mortgage broker Property Master states that the average rate of a typical two-year fixed-rate mortgage of 160,000 pounds sterling with a loan-to-value ratio of 60 percent has increased by a total percentage point to 2.69 percent from 1.69 percent this year. There is little difference in rates and fees between fixed and variable purchase-to-rent mortgages with an LTV of up to 75%.The original surge in buying for rent was triggered by legal changes related to leases in the 1990s, in addition to a tax regime that favored landlords. Generally, your current mortgage product will return to a higher interest rate when your current contract ends.

So while things have changed for mortgage holders who buy to rent as a result, there are other tax breaks that can be requested, and recent research showed that this aspect of things had increased. While the new types of stamp duty remain intact in this week's explosive 180-degree shift in taxes, corporate taxes will rise again, which could affect. However, while interest rates have risen, there are now more BTL products on the market, which means that savvy savers have a better chance of getting a good deal. Virgin Money and Barclays currently offer the lowest two-year rates on the market for homeowners who remortgage, at 3.2 percent and 3.23 percent, respectively. However, rising mortgage rates suggest that profitability will decline when many homeowners refinance their loans.

You can contact your current lender to request a switch from a residential mortgage to a purchase-to-rent mortgage. Dan Lee from Total Landlord Mortgages has pointed out that some homeowners who are analyzing the buy-to-rent mortgage market right now are “having problems” when it comes to borrowing. However, those whose mortgage conditions soon come to an end should seek a new solution before rates rise even higher. This week he said that the average homeowner who pays taxes with higher rates and who remortgaged last month could expect their annual net profit to plummet from 3,198 to 884 pounds sterling - representing a decrease of 72% compared to last year due to rising rates. Some lenders may allow you to continue using your residential mortgage for a while, but they will usually want you to switch immediately to a purchase-to-rent mortgage.

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