Landlords Opting For 5-Year Btl Fixes
Landlords are increasingly opting for five-year fixed rate buy to let products, one index has revealed.
The data from Mortgages for Business highlights that in the last quarter of 2018, 84% of landlords had opted for a five-year fixed product.
That's up from 70% who did so in the previous quarter.
Now, the mortgage broker says the growing popularity of these products is probably down to the less strict tests and better stability being promised in an uncertain economic and political climate.
The firm's research also highlights that 97% of all landlords applying for a mortgage opt for fixed rates.
Preference for five-year rates for landlords
The managing director of Mortgages for Business, Steve Olejnik, said: "The popularity for five-year rates for landlords is both a chance to maximise borrowing and a protective measure.
"Both brokers and lenders need to account for this when predicting business growth."
The index also highlights that the number of landlords using a limited company for BTL applications rose to 51% of all borrowing - up from 39% for the previous three months.
Mr Olejnik says he expects more landlords to use limited companies.
The flat fee has also risen for the first time since 2016 to £1,506 at the end of 2018, up from £1,423 a year ago.
Landlords are also finding that the way they are charged by lenders is also changing with half of the products having a percentage-based arrangement fee, which is a rise from 42% at the start of 2018.
One reason for this is that the BTL market is becoming increasingly specialist in its nature.
Mr Olejnik explained: "Products for specialist scenarios are higher as lenders can claw back the margins that are lost with competitive pricing to apply a percentage based fee and not a flat fee."
Landlords welcome Universal Credit reform
Meanwhile, a government announcement for the reforming Universal Credit, which will include an online payment system for landlords, has been welcomed by agents and landlords alike.
The reforms have been announced by Amber Rudd, the Work and Pensions Secretary.
The vice-chair of the Residential Landlords' Association, Chris Town, said: "Our research shows that 61% of landlords who have tenants on Universal Credit saw them go into rent arrears - that's up from 2016's figure of 27%.
"Anything that gives landlords greater confidence in the system will help and ensure tenants have security knowing that rent will be paid."
He added: "Speeding up and improving the process for payments to be made directly to the landlord has been a part of our campaign on Universal Credit."
