Buy-to-let lenders swing back towards variable fees

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Buy-to-let lenders increasingly favour percentage-based arrangement fees over flat fees, according to Mortgages for Business.

The broker’s latest Buy to Let Mortgage Costs Index shows that 44 per cent of buy-to-let loans in Q1 2017 had variable fees, overtaking flat fees (at 41 per cent) for the first time in four years.

Mortgages for Business also found an increase in the average flat fee in Q1 this year, up to £1,446 from £1,397 in Q4.

These two changes have increased the average effect of mortgage charges to 0.64 per cent.

This is up from 0.62 per cent in Q4.

Mortgages for Business chief operating officer Steve Olejnik says: “With the challenges lenders have faced to generate business in the face of successive blows to the buy-to-let sector, it is only natural that many have chosen to focus on cutting rates at the cost of increased fees.

“”The recent trend towards percentage-based fees is an example of lenders doing exactly this, as fees of this type become more expensive for larger loans.”

The index also shows that there has been a shift in the pricing of five-year fixed rate products.

Five-year fixes at more than 75 per cent LTV saw a 0.2 per cent increase in headline rates.

The broker says this is due to higher investor demand following tighter PRA affordability guidelines, which only partially apply to long-term fixed rates.