Buy-to-let fixed rates provide certainty

Sarah Davidson

March 31, 2016

Offering longer-term fixed rates to landlords could alleviate the pressure of stress testing proposals laid out by the Financial Policy Committee, Foundation Homeloans has suggested.

Simon Bayley, commercial director at Foundation, said offering the ability to match mortgage repayments with rental charges over longer periods provides a degree of certainty with fixed rates that pay rate mortgages cannot offer.

A longer-term fixed product also allows landlords to provide better rental cost certainty to their tenants, he argued.

He said: “The FPC is right to look at underwriting standards and stress testing in buy-to-let.

“It is important to offer the right product for each customer’s circumstances, so as well as offering our very popular 4.39% five year fixed product, we continue to offer our shorter fixed and tracker products to deliver a strong product selection.”

In its consultation paper released on Tuesday the Financial Policy Committee proposed that buy-to-let lenders should stress test loans for five years or against a rate of at least 5.5%.

Bayley added: “Most of our products are geared towards fixed rates and the tracker and variable rate products we offer are more than covered by our current rental cover calculators.

“We are very comfortable that our criteria are attractive to borrowers while we continue to be prudent, minimising the risk of overextension in our underwriting.”

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