The UK buy to let mortgage market has changed significantly in recent years. As such, the Surrenden Invest team has consulted with mortgage expert Anthony Rose of LDNfinance for an up-to-date view of where the market is at, from interest rates to typical terms.
Given the changes to the UK mortgage market in recent years, is it still possible to get a buy to let mortgage?
The buy to let market has undoubtedly changed in recent years but it has been boosted by a large number of specialist lenders entering the market and existing lenders improving their offering. We have seen a sizeable shift towards clients purchasing using a Limited Company structure rather than in a personal name and mortgage lenders have been quick to respond to this with new offerings.
Who are the major providers offering B2L mortgages today?
Where buy to let finance has become very specialist, there is a greater spread of lenders than there used to be. However, the main lenders, by market share, will be BM Solutions, TMW, Barclays, NatWest and Santander.
What interest rates are they offering?
Buy to let rates are as competitive as they have ever been. Clients with large deposits can potentially access interest rates starting at 1.5%. In more specialist situations, such as non-standard properties or non-UK residents, rates can go up to around 6%.
What do the typical terms range from/to?
Most buy to let buyers historically preferred two-year terms due to the flexibility these offer. However, many lenders are now offering higher loan sizes if a five-year option is taken and this is proving very popular with clients as they can reduce the level of deposit they need to put down on the property purchase, which can either free up funds or may mean they can purchase more than one buy to let at a time.
What is the typical deposit required to be put down from the buyer?
For the right buyer and right property there are options with a 20% deposit, but most mainstream lenders require a 25% deposit. A lot of clients are opting to put down a higher deposit, of up to 40%, to secure more favourable terms.
Can you talk us through the new lending criteria that have been introduced and what they mean for investors looking to secure a mortgage?
Changes to buy to let taxation have meant lenders now use more stringent calculations to determine how much they will lend versus a given rent. For many clients, this means they will need to increase their deposit. However, with an increase in competition, especially from specialist providers, an experienced broker should be able to offer the right solution.
What other eligibility criteria do buyers need to meet?
Generally, buy to let lenders prefer people to have a personal income outside of rent received, as well as being the owner of their own main residence. Despite that, there are options available for first time buyers, non-UK nationals and most other situations with the correctly chosen lender.
What should potential investors budget in terms of fees/charges when taking a mortgage?
Fees can differ greatly depending on the lender and type of mortgage product chosen. A mortgage adviser should always consider all fees when recommending a product. The main consideration for property investors when considering fees in the current climate is the increased Stamp Duty levy for additional properties.
What impact has the first base rate rise in a decade had on the market?
As buy to let rates are so competitive, there has been no noticeable difference in the products on offer. In some cases, property investors have brought forward their plans to purchase another buy to let as they believe the market is strengthening.
Why do you feel that obtaining a mortgage to invest in UK buy to let remains a good choice?
With mortgage rates still near historical lows, the cost of funding a buy to let with a mortgage, compared to buying it fully with cash, is the preferred option for most investors.
What would be your top tip for any investor looking to secure a buy to let mortgage?
The most important thing is to engage with an experienced broker as early in the process as possible to secure the right funding. The recent criteria and taxation changes have meant buyers need to explore all options before making their offer.