HTB: BTL rates are not at their lowest yet

Michael Lloyd

November 22, 2019

Buy-to-let (BTL) rates are not yet at their lowest with room still to drop, Alex Upton from Hampshire Trust Bank has claimed.

Upton said: “The market is awash with lenders with cash who are dying to lend but everyone knows that the buy-to-let market is flat at a headline level.

“Just like any market, when you have an oversupply, prices typically fall.

“And we haven’t hit the bottom yet.

“This isn’t new – there has been a ‘the race to the bottom’ for years, the only difference is that the bottom keeps moving lower.

“This isn’t a sustainable position for the market.

“Eventually we will hit the point where lenders will pull away from the market.

“There are a number of things to consider besides rate – we need to ask ourselves, what sits behind the rate?

“Not only in terms of the small print, but what can the lender offer in terms of expertise and people to facilitate a deal?

“How can the lender flex and tailor a deal to suit the specific needs of the client?”

Payam Azadi, director of Niche Advice, added that vanilla BTL lenders will drop their rates.

He added: “I think they will drop rates. For one of my own properties a few months ago I got a 5-year fix with a free valuation and legals at 2.04%.

“I thought I had got myself a steal but rates have dropped quite a bit even in the last couple of months.

“To attract business lenders are pricing themselves competitively at the moment.

“Uncertainty around the economy has made the buy-to-let market a bit subdued so lenders have been fighting for business with really good rates.

“Rates can still drop further just like with residential mortgages.

“In the longer-term something has to give and there isn’t much margin out there.”

Azadi added that rates are not always the solution and criteria is just as important.

He said: “Yes rates could drop, but lenders have to be flexible with their criteria and greater attention needs to be given to early repayment charges.

“Because of the PRA rules more attention needs to be given to a more flexible type of mortgage.

“There are quite a few lenders which don’t allow you to make overpayments on your mortgage.

“You have fantastic products from lenders like Coventry with a 5-year fix with no early repayment charges, enabling clients to use the 5-year stress rate without being tied in for five years.

“There needs to be more innovation around those types of products, with good rates and flexibly to maneuver in the future.”

Upton added: “We are always looking at criteria and how we can continually meet the evolving needs of the market.

“It goes without saying, but we have no plans to change our rates at present.”

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