Bristol & West Mortgages has lowered its nominal rate to 6.5% from 7.75%.
This means that all minimum rental yields will be calculated on this rate, except for the five-year fixed products, which still use the actual rate.
For example, when a buy-to-let loan application is considered, theamount of money offered to the customer is calculated on the loan amount multiplied by 6.5%, the assumed interest rate. This is then multiplied by 125% or 130%, and this is the percentage value of the loan that Bristol & West Mortgages require to be covered by the rent in order to protect the customer. This amount is then divided by 12 to get the minimum estimated monthly rental income required.
Bristol & West Mortgages have supported the new rental calculation by launching two five-year fixed buy-to-let mortgage products from tomorrow:
The first is at 5.45% fixed until September 30 2007 with no extended tie-in, a £299 booking fee, and up to 85% LTV. The second is at 5.55% fixed for the same period with no extended tie-in, £299 arrangement fee and up to 85% LTV.
Neena Kithoray, senior product manager for Bristol & West Mortgages says: “We have listened to the concerns of our customers regarding the buy-to-let market and have responded in two ways: By reducing our nominal rate, customers will benefit in terms of yield calculations, enabling them to borrow more for their investment.
“By launching two low rate fixed mortgages, customers will not only pay a lesser monthly payment but will also benefit from the security a fixed rate mortgage brings in a time of interest rate uncertainty. Both of these changes put our customers in an excellent position to continue with their buy-to-let investment