Buy-to-let landlords can now bag mortgages with interest lower than 1 per cent, after two lenders slashed their rates.
Those buying a home to live in have enjoyed super-low rates for some time, but this is the first time landlords have been able to get in on the action.
The Mortgage Works, Nationwide’s buy-to-let arm, has launched a loan with a record-low rate of 0.99 per cent, thought to be the lowest ever rate on a buy-to-let mortgage.
Landlords buying or remortgaging properties can now access rates as low as 0.99%
The two-year fixed rate is only available to landlords with deposits of at least 35 per cent.
The real sting in the tail of the headline-grabbing rate is the hefty fee which is the equivalent of 2 per cent of the loan amount.
For a home of £400,000, for example, a buyer would need to pay a whopping £4,800.
Previously, the lowest rate for a buy-to-let mortgage was 1.16 per cent with a £1,549 fee with Barclays.
Almost matching TMW’s offer is Platform, the landlord arm of the Co-operative Bank, which has launched a buy-to-let mortgage with a 1 per cent rate.
The two-year fixed deal is available to those with deposits of at least 40 per cent and comes with a fee of £2,450.
Known as the ‘premier’ buy-to-let mortgage, it is only available on property purchases between £350,001 and £500,000, and the landlord must have a household income of at least £60,000.
They can also only have a maximum of three buy-to-let properties.
Both TMW and Platform’s products are available for both purchase and remortgage.
Upfront fees need to be factored into a landlords’ calculations when choosing a mortgage
The lenders have also launched other rates, including products for those with lower deposits, and higher-rate options that come with smaller fees.
When choosing a mortgage, borrowers should factor in any upfront fees into the cost of their annual payments, to make sure they are really getting the best deal.
>> Work out the true cost of a mortgage using the This is Money calculator
As the table below shows, opting for a much higher interest rate could save landlord money overall – though this always depends on the value of the property.
In this example, we have worked out the three cheapest two-year fixed mortgages by annual cost for a buy-to-let borrower purchasing a £400,000 property with an £160,000 (40 per cent) deposit.
|Lender||Initial rate||Fees||Annual cost|
|1. Leeds BS||1.58%||£0||£11,627|
|The Mortgage Works||0.99%||£5,205||£13,443|
With its 2 per cent fee, TMW’s 0.99 per cent rate would cost almost £13,500 per year – £1,800 more than Leeds BS’s 1.58 per cent deal.
The TMW fee may be better value for those who are buying less expensive properties.
For example, someone buying a £150,000 home with a 40 per cent (£60,000) deposit would pay only £2,040 in fees – more in line with other low-rate, high-fee mortgages on the market.
However, it is still not the best deal in in terms of yearly cost, with Leeds BS’s 1.58 per cent rate coming in £725 per year cheaper.
|Lender||Initial rate||Fees||Annual cost|
|1. Leeds BS||1.58%||£0||£4,360|
|3. Skipton BS||1.76%||£0||£4,452|
|The Mortgage Works||0.99%||£2,040||£5,085|
The first sub-1 per cent rates for owner-occupiers were launched in April, and have since dropped as low as 0.81 per cent – though they are often only available for a matter of weeks.
Mortgage rates have been dropping for several reasons.
The recent housing boom has led to increased competition among lenders, who are keen to attract low-risk business from those with high deposits to balance out riskier 90 and 95 per cent deals they are offering at the other end.
Banks are also awash with cash to lend, after savers stashed away significant amounts with them when the UK was under lockdown.
And the Bank of England’s interest rate remains at 0.1 per cent, meaning that banks themselves can borrow money very cheaply and pass this saving – at least in part – on to their customers.
Landlords looking for new mortgage deals may do well to hold out and see what else is on offer, as brokers predict more buy-to-let rate cuts coming down the line.
Mark Harris, chief executive of mortgage broker SPF Private Clients, said: ‘It was only a matter of time before the sub-1 per cent mortgage price war spilled over into buy-to-let but with lenders awash with cash and keen to lend, it is the logical next step.
‘Other lenders are likely to follow suit. There is a lot of appetite to lend and competing on rate or criteria are the main ways in which lenders can attract business.’