A new fixed-rate mortgage has gone straight to the top of the best buys list forlandlords.
The five-year buy-to-let deal has been launched by TMW, part of Nationwide Building Society, and comes with an impressively low rate of just 1.99 per cent.
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It will be particularly attractive to landlords hoping to safeguard their profits against future interest rate rises. The Bank of England raised interest rates by 0.25 per cent to 0.5 per cent in November last year. It was the first increase in 10 years. The previous rise was at the beginning of the credit crisis in July 2007.
At the time of the rate rise last year, the governor of the Bank of England, Mark Carney, suggested that interest rates are likely to increase twice more in the next three years.
New deal can skirt stricter affordability tests
The five-year mortgage product from TMW is also appealing to landlords as it will fall outside of new stricter lending criteria rules being imposed on landlords.
Lenders must assess whether landlords can afford a buy-to-let mortgage not only on where interest rates currently stand, but also if they rise to 5.5 per cent - a process know as ‘stress-testing’.
However, lenders do not need to apply this 5.5 per cent rate if the deal is for at least five years. Instead, they can choose the rate at which they assess affordability. Lenders’ policy on this varies considerably, according Ray Boulger of mortgage brokers John Charcol, with TMW using a stress rate of 4.99 per cent on fixed rates of at least five years.
The five-year deal from TMW comes with a £1,995 fee and landlords must have a 50 per cent deposit if they want to secure the 1.99 per cent rate.
No fee options
The TMW product is also available with no fee, but rates are higher for this option and start at 2.39 per cent.
Paul Wootton, managing director of TMW, said: “TMW is offering landlords a range of new buy-to- let deals with competitive rates in the market, including our lowest ever five-year fixed rate product. The aim is to help landlords to manage ongoing costs and offer a wider choice of options.
“This is particularly important in an environment where managing cash flow and costs has become increasing significant for both portfolio and smaller scale landlords.”
Several tax hikes have been imposed on landlords, including a 3 per cent surcharge on stamp duty, and a reduction in the tax relief that they can claim.