Variable rates grow in popularity

Amanda Jarvis

April 19, 2006

According to the lender, variable rate mortgages will start to become more popular as the pricing of fixed rate deals increases.

James Taylor, mortgage product manager at the West Brom, said: “The two year swap rate reached 4.91 per cent this morning, its highest level for nearly two years. Strengthening economies in Europe and the US, combined with Brent crude futures hitting a record $71.40 a barrel and continuing concern about Iran’s nuclear ambitions, have conspired to worry traders and force swap rates to their current high levels.

“Although this will feed through in terms of higher fixed rate mortgage deals, the good news is that variable rate products will remain unaffected. This is one of the reasons why the West Brom has recently launched a buy-to-let mortgage with an interest rate which tracks Bank Base Rate, rather than being fixed. I anticipate trackers becoming increasingly popular as swap rates continue to climb.”

The buy-to-let mortgage launched by the West Brom has a pay rate of 4.75 per cent (Bank Base rate + 0.25 per cent) for two years from completion. It is available for purchase or remortgage up to £1million to 75 per cent LTV, or £500,000 to 85 per cent LTV. There is no restriction on the number of properties up to a maximum portfolio size of £10 million and standalone rental cover is calculated at 120 per cent of the Society’s lowest buy-to-let product pay rate (currently 4.75 per cent).

The product, in common with other buy-to-let mortgages from West Brom, has interest calculated on a daily basis and provides a range of flexible features including unlimited overpayments, underpayments and payment holidays. There are no Early Redemption Charges and an arrangement fee of 1.5 per cent can be added to the loan. A proc fee of 0.35 per cent (maximum £1000) is payable to intermediaries.

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