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Landlords flock to five-year fixed rates

landlord, BTL, wordsLandlords are increasingly opting for five-year fixed rate mortgages as a result of record low rates and following less stringent affordability tests than shorter-term products.

The figures, from Buy to Let Club, show that the proportion of its of landlord customers opting for five-year fixed rates has jumped to 42 per cent, compared to just 15 per cent two years ago before the Prudential Regulation Authority’s stress-testing changes which made longer term fixes more attractive.

The rules mean that lenders are able to offer lower income ratio calculations on five-year deals than two-year alternatives.

The Buy to Let Club says landlords are also looking for greater certainty and protection from interest rate rises as Brexit negotiations continue.

The market is also capitalising on the fact that five-year fixed rates are at an historic low.

Between 2008 and 2013, the average five-year fixed buy to let rate at 75 per cent LTV fluctuated between five per cent and 7 per cent, yet today many lenders are offering products at rates less than 2.7 per cent.

Buy to Let Club managing director of Ying Tan says: “We’ve seen a steady increase in the number of clients opting for five-year fixed rates over the last few years.

“With extremely competitive rates and the added security that they present, it is not surprising that they are a popular option for investors.

“Of course they also have the added benefit of less stringent affordability tests that make them appealing for raising finance against low-yielding properties.

“We have a number of fantastic five-year rates at present including a brand new exclusive with Santander at 2.54 per cent with a £1,999 fee up to 75 per cent LTV that is available for both purchases and remortgages.

“Principality’s 2.55 per cent rate and Virgin Money’s 2.64 per cent rates at the same LTV are also proving popular.”



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