New buy-to-let mortgage rates that start from 1.89 per cent have been launched by Barclays. The lender says the rates for both new and existing landlords are its ‘best ever’.
They include a rate of 1.89 per cent rate on a two-year fixed rate deal and a rate of 2.99 per cent on a 10-year fixed rate mortgage.
The 10-year deal is particularly interesting as new buy-to-let rules mean some landlords are being forced to look at longer-term options.
This is because regulators have applied tough new checks on borrowers taking out deals under five years, amid concerns that landlords are taking on too much debt and may not be able to cope when interest rates rise.
Under the new rules, introduced by the Prudential Regulation Authority watchdog, lenders are being forced to conduct so-called stress tests to ensure borrowers can afford to pay back their loan if interest rates rise. This means borrowers must be able to afford the loans if their rates were to rise to 5.5 per cent.
Some borrowers may no longer be able eligible for the shorter-term deals under the new rules, pushing them towards the longer-term options (where the new rules do not apply).
The 10-year fixed deal from Barclays offers a competitive rate of 2.99 per cent and will be appealing to some borrowers as it offers greater security over payments. It could also end up saving borrowers money as they avoid paying high fees to remortgage.
However, there is a risk that borrowers may be pushed towards these longer-term deals even if these deals are not appropriate for their circumstances.
For example, longer-term deals tend to have higher rates, which means that investors pay more on their monthly payments - and this may not be covered by rent.
There is also a danger that lenders could be accused of irresponsible lending further down the line.
But Craig Calder, director of Barclays Mortgages, insisted: “We are providing greater choice to individual landlord investors across the UK than ever before who are looking to purchase or remortgage rental properties.”
“Barclays also considers both personal and rental income for affordability purposes, helping individuals with a variety of income types to achieve their landlord aspirations.”
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