Recovery Shown in Buy to Let Mortgage Rates

The new government has decided to raise capital gains tax. Despite this fact, buy-to-let lenders are predicting a phoenix like rise for this area of the property market. They are the sector most hit by the credit crunch.

It is predicted that CGT on non-business assets such as buy-to-lets are expected to leap from 18% to 40%, when George Osborne’s emergency budget is revealed. Some landlords are predicting a 'fire sale' of properties, but there is confidence amongst lenders that sales of this type of mortgage will have a firm recovery.

There are more attractive products coming onto the market and two new lenders are to enter the buy-to-let market within the next couple of weeks. Rents are on the up, rising to 0.6%, making the average rent payment £663 per month. It is 2.2% higher than a year ago.

During this recession Buy to let landlords found it virtually impossible to borrow more than 75% of a property’s value, but, only this week, 80% deals were revealed.

This may not be good news for all, as some blame this sector for driving property prices up and damaging the prospects for first time buyers. It seemed that at the height of the boom, practically everyone was a property developer looking to cash in, using it as an alternative pension scheme.

Then the proverbial bubble well and truly burst in 2008/2009, as the lack of funding led to most lenders running for the hills. As a result, mortgages became far more difficult to obtain.

There is evidence to indicate that this is changing. Several buy-to-let lenders gave been lowering rates and loosening their lending restrictions.

The Mortgage Works this week launched a range of buy-to-let deals at 80% Loan to Value, though many of the fees are astronomical up to 3% of the loan. Recently Nottingham building society lifted its maximum LTV from 70% to 75%, upped its maximum loan from £200,000 to £250,000 and relaxed its rental proviso. These are definite signs of lender confidence.

Meanwhile, a new name in British banking, Aldermore, is expected to take the lid off its buy-to-let deals this month. It is thought that they will initially discount new builds and complex residential investments, only allowing one property per applicant. A cautious entrance but it is a start and introduces another player into the marketplace.

The Mortgage Works deals include a one-year fixed-rate and a one-year tracker, both at 4.69% and with a hefty arrangement fee of 2.5% of the loan. There is an 18-month fix at 5.49% (with a 2.5% fee), and a two-year fix and three-year fix, both at 5.99%, with a fee of 2.5% and 3% respectively.

> Back to Helpful Articles

Special Offers