Buy-to-let news

BTL rates ‘spiralling out of control’

26 January 2008

With lenders in other markets forced to pull or reassess their product offerings as a result of the credit crunch, Hugh Nichols, partner at Badbury Berkeley Financial Services, suggested that lenders in the BTL market had taken the decision to keep product rates low, but hike up arrangement fees as a way of recouping margin.

He also admitted that if fees continued to rise, the market would collapse.

He said: “The BTL market is going crazy at the moment. There are lots of very competitive rates that borrowers will lock onto, but they don’t realise the arrangement fees, which often run into thousands.

"Borrowers will soon be put off if the fees continue to rise, which would not be good for the market. Fees are subsidising the low rates and this can’t go on.”

Andy Young, chief executive officer at The Business Mortgage Company, said: “High arrangement fees have been common in the BTL market for some time now.

"If lenders continue to offer products with high fees in 2008, it is unlikely to directly affect the appetite of borrowers. Arrangement fees of up to 2.5 per cent are generally accepted in the BTL market as fees of this size can help to drive lower initial rates.

“Investors are most interested in products with low initial rates because rental calculations, which can determine how much can be borrowed, are normally based on the initial rate.

"Provided arrangement fees don’t exceed acceptable levels, these products will continue to sell providing the initial rates are attractive.

“The outlook for the BTL market is positive for the year ahead and high arrangement fees are unlikely to put off landlords from investing in rental property.”

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