New research from Mortgages for Business has shown that, in order to keep their BTL rates competitive, many lenders are choosing to absorb more costs.
According to the report, the underlying cost of funds rose in Q4 2017. Swap rates remained elevated, coinciding with the hike in Bank Rate, and by the end of the year two, three and five-year swaps were higher than at the start of 2017.
However buy-to-let lenders, whose margins have been diminishing since July 2016, chose not to pass on the increases to borrowers and instead squashed their margins further. The data revealed that, between the beginning and the end of 2017, average lender margins over swaps had declined by 0.4% points.
The data also found that while fees added an average of 0.58% to the headline rate advertised to borrowers, this is the lowest amount since the beginning of 2013 when Mortgages for Business started tracking this data.
Fee-free products accounted for 16% of the market in Q4, up from 14% in Q3, and the proportion of products with percentage-based fees dropped from 44% in Q3 to 42% in Q4.
At 42%, the proportion of products with a flat fee structure remained the same, although the average fee charged by lenders rose by £53 to £1,423.
Steve Olejnik, COO of Mortgages for Business, said: “I doubt that lenders will consider lowering rates again. If anything, I would expect them to find ways of making up for the lost margins, particularly given that overall buy-to-let lending looks set to dip this year.
Looking back over the last couple of years, flat fees have actually come down in price from over the £1,500 mark. The fact that they increased in Q4 could be a sign that borrowers are about to experience price hikes not only on the underlying costs but also at the point of sale. Now is definitely a very good time for landlords to review their borrowing arrangements.
If I were in the market for a buy-to-let mortgage, for either a purchase or a refinance, I would consider fixing for five years. And I would be asking my broker about fee-free products whilst there are more of them around.”
Belvoir Liverpool Central sales team can be contacted on 0151 231 1613 opion 1 or email us at liverpoolcentral.sales@belvoir.co.uk
