Buy-to-let mortgage rates slashed in new price war as Nationwide offers the first ever five-year fix below 2% for landlords
Nationwide's buy-to-let arm, The Mortgage Works, has slashed mortgage rates and launched the first ever five-year fixed rate for landlords below 2 per cent.
The deal is priced at 1.99 per cent for five years and requires a 50 per cent deposit or equity in the property. It comes with a hefty £1,995 fee. Rates for the zero fee version of the deal start at 2.39 per cent.
The lender - one of the UK's biggest buy-to-let mortgage providers - has also cut rates across its buy-to-let range by 0.15 percentage points and launched a fee-free two-year fixed rate at 2.14 per cent.
Buy-to-let mortgage approvals (pictured) spiked ahead of the stamp duty surcharge in April 2016
There are changes to rates for those existing customers looking to switch products as well, with fixed rates now starting at 1.99 per cent.
It comes a week after the lender reported disappointing profits, partly down to lower lending to landlords and amid a spike in the number of landlords needing to remortgage as their two-year deals come to an end in the next six weeks.
In April 2016, all buy-to-let purchases started to incur a 3 per cent surcharge on the amount of stamp duty payable.
Because the then Chancellor George Osborne announced this change the previous autumn, a huge number of people went out and bought new buy-to-lets ahead of the April deadline.
This caused a massive surge in the number of landlords taking buy-to-let mortgages in the first three months of 2016. And now those who opted for a two-year deal are facing the prospect of remortgaging.
Andrew Montlake, of mortgage broker Coreco, said: 'Given that many borrowers hurried through purchases to beat the stamp duty changes two years ago, there is a spike in remortgages expected in the coming months that lenders are looking to take advantage of.
'As changes to criteria and underwriting are now tied up by regulation, pricing is the only real key differentiator for most lenders, so we expect to see price wars continue in this area of the market for some time yet.'
Other lenders are also offering competitive rates.
BM Solutions has a five-year fixed rate at 2.09 per cent available up to 60 per cent loan-to-value which comes with a £1,995 fee and free valuation.
For those looking for a lower cost set-up Skipton Building Society has a 2.45 per cent five-year fix up to to 60 per cent LTV with no fee, a free valuation and free basic legal work for remortgages.
Buying up: There was a surge in the number of landlords buying property before the stamp duty surcharge was introduced
If you have less equity in the property, Principality Building Society has a five-year fix at 2.5 per cent with a £1,395 fee available up to 75 per cent LTV. It also offers a five-year fix of 2.85 per cent to 75 per cent LTV with no fee.
David Hollingworth, of London & Country Mortgages, said: 'Lenders are increasingly offering a range of fee and rate combinations to meet the varying needs of landlords.
'And the number of standard deals has been increasing in the past week or so. This is a stark reminder that competition in the buy-to-let market is just as fierce, if not more so.'
Need to remortgage your buy-to-let now?
If you're a landlord remortgaging in the next month or so, you'll need to be aware that the market has changed significantly in the past two years.
Tax relief on mortgage interest has started to fall and there have been a number of changes to the way lenders consider buy-to-let mortgage applications.
The primary thing to consider is that two years ago, it's likely you needed to show that the rental income covered the mortgage payment by a ratio of 125 per cent.
That ratio is now 145 per cent for the majority of lenders, although there are some that will accept a lower ratio depending on your income tax bracket and whether you have any additional earned income.
This payment will also now be stress-tested by the lender to ensure if interest rates were to go up to 5.5 per cent, you'd still be able to pay the mortgage each month.
This particular rule only applies to mortgages fixed for fewer than five years, however, so if you opt for a five-year fixed rate, you only need to show the rent to mortgage ratio is 145 per cent for the mortgage rate on your deal.
If you own four or more mortgaged buy-to-lets, there are additional rules that now affect you.
Every time you apply for a buy-to-let mortgage or remortgage, the lender will need full details about all the properties you own. This is because of new 'portfolio landlord' rules that came in under the Bank of England in October last year.
If you have little equity in the property, this could restrict the number of deals available to you and may even mean you're unable to remortgage.
Many landlords have found themselves in this position in recent months and have had to sell a property to top up the equity in their remaining properties in order to pass the stricter lending requirements now in place.
If you're not sure what your options are, make sure you talk to a mortgage broker as early as possible before your deal ends.
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