KEEN TO LEND

Despite recent turmoil on the international banking scene, UK lenders appeared to have focused on the March budget, reducing swap rates in response. This has increased confidence in the stability of current interest rates with the result that lenders are once again chasing market share. This is true across the board, though the stress tests for some loans are stricter than others.

BTL: HIGHER FEE, LOWER RATE

For buy-to-let mortgages, lenders must look at the ability of rental income to cover the loan cost at the agreed rate, plus a buffer in case rates move. They also have required profit levels. Thus, if a loan needs to be at a lower rate to pass the stress test, some lenders will increase the arrangement fee to offset the reduced profit on the loan. A 5% loan with a 1% fee, might be reduced to 4.5% with a 3% fee or a 4% loan with a 5% fee if needing to stretch borrowing to the maximum.

FEES & LOWEST RATES

The differences between packages offered to borrowers with different levels of risk are currently reflected more in the fees than the rates. Again, this reflects stress tests which determine that, even at high loan-to-value rates, those who receive offers, will be a safe bet. Thus a first time buyer with 10% deposit, buying at the zero stamp duty threshold of £425,000, can often currently secure two year fixed at around 5% or five years at around 4.5%. The most low risk borrowers looking for a fixed rate might be looking at around a 4.4% rate fixed for two years or, for five years, around 3.99%.

For independent advice, contact Private Finance on 0870 600 1650 or jackson-stops@privatefinance.co.uk.