Private landlords are being offered an opportunity to secure low interest rates for a decade, after Barclays launched a 10-year buy-to-let mortgage fixed at 2.99%.
The mortgage, which comes with a £2,000 fee, is not subject to strict rental income requirements because of the long nature of the loan, which suggests that some buy-to-let landlords may be able to potentially borrow more than they could on a short-term fixed rate.
On mortgage products with a term up to five years, the lender requires landlords to demonstrate that their rental income will cover their mortgage payment by a ratio of 145% if their mortgage rate went up to 5.5%. But this rule is waived in favour of a more flexible ‘affordability calculator’ on products that are five years or longer.
Commenting on the new buy-to-let product launched by Barclays, Jonathan Harris, director of mortgage broker Anderson Harris, told the press: “A 10-year fix for buy-to-let is unheard of and the result of changing circumstances for the sector.
“What is exciting about this product is that the affordability calculator takes into account the applicant’s overall income and expenditure position – so massively benefits those applicants with strong incomes and limited commitments.
“The upshot is that they can borrow more than previously – a welcome innovation to recent restrictive practices in the buy-to-let market.”
However, landlords considering this product should be aware that it comes with a high exit charge of 5% if you need to sell or remortgage before the 10 years have passed, making it a gamble if you are unsure of your future plans.