With five-year buy-to-let mortgage rates currently among the lowest levels ever seen, a leading mortgage broker is urging more BTL landlords with mortgages to consider locking into longer term deals.
Jeni Browne, of the specialist buy-to-let mortgage broker Mortgages for Business, wrote an article for This is Money last week in which she pointed out that “there are lots of good five-year fixed rates around at the moment. Very good, in fact”, and so she asked the obvious question: “Why don’t more people take them?”
Browne suggested that part of the problem is the fact that mortgage brokers generally want buy-to-let landlords to take out short-term home loans, “as they will get to do your remortgage sooner”.
With rates at a near record low of just 0.5%, and with further hikes anticipated in 2018, Browne firmly believes that more landlords should secure a more favourable long-term deal now.
She continued: “On personal borrowing, two-year fixed rate buy-to-let mortgages start at 1.34 per cent and five-year rates at 2.17 per cent [borrowing via a limited company is a little bit higher].
“Add in the cost of remortgaging after two years, and the higher rate you will be going onto after this time, because let’s face it, rates will be higher then, and actually, the cost difference becomes much smaller because of the fee.
“Plus, you can’t put a price on a good night’s sleep and taking a five-year fixed rate now will certainly provide you with some security particularly as we watch Brexit and wider world issues unfold.”
“Additionally, in the world of buy-to-let, on many five-year fixed rates, you can borrow more against the rental income than you can on a two-year or three-year deal as lenders are allowed to be a little more generous with their stress tests on longer term fixed rates,” Browne added.