Buy to Let Mortgage Rates Should Improve as Competition Returns

Investing in houses and flats, which is known in the UK as buy to let investing, has been getting slowly back onto its feet in the past few months. Although it had been really hard hit by the recession, the fall in property prices and a freeze in bank lending, there are now a few green shoots that are starting to emerge. One of the clearest signs of confidence returning is the fact that many more banks are now prepared to lend to residential property investors than were willing to do so even a few months ago. A number have also come back into the market with new products and there are even new lenders starting up in the business. Just a few months ago that would have been unthinkable. Happily it is now happening.

The biggest beneficiaries of the entry of new banks and lenders will be landlords because more competition should help keep buy to let mortgage rates lower. These have in fact been a lot higher than might have been expected given the record lows to which official Bank of England interest rates have fallen. But much of the fall has been gobbled up by banks that have been keen to try to improve their own profitability. To do this, they have been pushing up the interest margins (or profit margins) that they charge customers. In effect they are punishing existing landlords and customers for the bad lending decisions they made two years ago when they bet so badly on subprime type customers and properties and then ended up losing a fortune.

The fact that there is more competition among mortgage lenders does not always mean that yours will be cutting its interest rates, especially if it thinks you are too stupid or lazy to look for a better deal. So be sure to shop around and compare rates. You will also likely get a much better rate if you have a low loan to value on the property. If you have enough spare cash tucked away to reduce your LTV then this might be worth doing, but only after getting good advice.

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