The buy-to-let market is buoyant as rates spiral downwards and brokers have an opportunity to win back remortgage business

Ying Tan

With buy-to-let rates on a downward spiral, investors have a greater incentive to expand and refinance their portfolios to more cost effective rates.

This is increasing business activity and keeping the buy-to-let market buoyant.

Since the credit crunch, investors reverting to 1.75 per cent over bank base rate have had little incentive to remortgage their properties.

However, investors who took out new business in the last two or three years face higher reversionary rates at bank base rate + 4.5 per cent, and a lenders’ SVR often in excess of 5 per cent.

This has made remortgaging a more attractive option for these investors, and provides brokers the opportunity to win back re-mortgage business.

Brokers can demonstrate that even after associated fees are factored in moving to a lower rate will reduce monthly payments and save on total costs over a given period.

Previously, re-mortgage business was only economical for landlords looking to release equity for further investment.

Hinckley and Rugby Building Society last week released a 2.69 per cent two-year discount deal at 60 per cent LTV.

This ground breaking buy-to-let deal is the lowest on the sourcing systems and the most competitive to hit the market in recent times.

In addition to a market leading rate it comes with a free valuation, no early repayment charges and a flat arrangement free.

Previously, great headline rates were accompanied with high percentage fees, driving up the overall cost.

This rate pushes the boundaries on this notion.

As lenders hunt for more business, the bigger lenders are hesitant to engage in a rate war that will reduce margins.

Instead in recent weeks, what we have seen is lenders loosening their criteria to attract new business.

After some initial mixed messages both BM Solutions and The Mortgage Works both confirmed that they would lend on properties which housed department for social security tenants.

This is an area which historically lenders have shied away from due to the perception of lower quality tenants, and difficulties in getting possession in the event of arrears.

Unlike in the past, BM Solutions will also lend on properties intended to house students.

This relaxation in policy is very positive news.

Students must be on the same assured shorthold tenancy agreement and a maximum of five students is allowed.

This is an interesting development as existing lenders for student properties cap the number of students at four.

This development potentially opens up a segment of the market that would usually have sought funding from lenders with a House of Multiple Occupation range. HMOs still remain outside BM Solutions lending policy.