Fixed-rate buy-to-let mortgages are starting to rise, although the Funding for Lending Scheme and tough competition has kept them in check so far, new research shows.
Rates on three and five-year fixed-rate BTL mortgages have increased due to the upward trend of long-term swap rates, according to new research from Mortgages for Business.
Rates have increased by an average of 0.25% since May to take the typical five-year fixed rate to 5%, it said.
Tracker rates have not been affected as yet.
David Whittaker, managing director of Mortgages for Business, said swap rates have been rising even faster: “To date the increases have been nowhere near as large as the increases in the underlying swap rates which have risen by around 0.5% for three-year swaps and 0.9% for five-year swaps.
"That is good news for investors because it’s a positive sign of increasing market competition and shows the effects of the Funding for Lending Scheme is filtering through.
"Of course, at some stage it is likely that lenders will play catch-up and these rates will go up. But when this will happen is anybody’s guess.”
The report entitled Buy to Let Mortgage Rates: The Real Costs, also shows a tiny rise in the cost of fees, which added an extra 0.5% to the headline cost of a BTL mortgage in the third quarter, up from 0.5% in Q2.
While half of all mortgages have flat arrangement fee structures, there was a 3% increase in the number of percentage based fees, which now account for 43% of all lender arrangement fees.
The average flat lender arrangement fee in Q3 2013 was £1,511. Only 7% of products are fee-free.
A separate piece of buy-to-let research, published today by LSL Property Services, shows average rents across England and Wales rose to £758 a month in October, up 0.2%, or £1, since September.
Rents are up 1.9% over the last 12 months to hit a new all-time high.
Lettings activity also accelerated, with the number of new tenancies up 7.4% compared to October 2012, despite a minor slowdown in the last month.
Despite record events, tenant arrears are at their lowest since 2008.
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