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Buy to let mortgage rates still higher than residential

Defaqto data shows that average rates for two, three and five-year fixed rate and two-year base rate tracker buy to let mortgages at 75% Loan-to-Value (LTV) have dropped markedly since September 2010, and that average arrangement fees have also fallen for several types of buy to let mortgage.

At the same time, Defaqto analysis shows that average interest rates and arrangement fees in the buy to let mortgage market remain significantly higher than for their equivalent residential mortgages.

For example, the average rate for a regular two-year fixed rate mortgage is currently 3.52% with an average arrangement fee of £844.  For a five-year fixed rate mortgage the respective figures are 4.25% and £727. 

David Black, Defaqto’s Insight Analyst for Banking, said: "For those looking to get into the buy to let market, the last year has seen some positive developments.  While interest rates and arrangement fees have reduced we have also seen a number of new lenders enter the market as well as existing lenders expanding their product ranges.

"People should factor mortgage fees into their calculations as, like the interest rate, they tend to be much higher for buy to let mortgages than for residential mortgages, and can make a real difference to the overall cost of the mortgage. Many borrowers will want to use the expertise of an adviser to help choose the best buy-to-let mortgage for their circumstances."

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