Landlords hit by huge fees on new buy-to-let loans

Published 18th Aug 2010

Landlords are being asked to pay massive mortgage fees despite a surge in loans being approved.

There were 24,900 buy-to-let mortgages granted in the second quarter of 2010 - a 13 per cent increase on the previous quarter. However, landlords still need a deposit of at least 30 per cent to qualify for the best rates.

Market Harborough BS is offering a two-year fixed rate at 4.5 per cent with a fee of £845 at 70 per cent loan-to-value. That would mean monthly repayments of £834 on a typical £150,000 mortgage.

Only The Mortgage Works, Clydesdale Bank and Bath BS will lend with a 20 per cent deposit, and there is a high price to pay for this.

The Mortgage Works’ three-year fix, for example, is 5.49 per cent but with a fee of 3 per cent - that would be a staggering £3,000 on a mortgage of £150,000, with monthly repayments of £920.

Principality BS has a two-year tracker at 3.64 per cent, available only for those with 40 per cent equity, which comes with a whopping fee of 3.5 per cent.

Melanie Benn of broker Private Finance says: ‘Landlords may be all right on their lender’s standard variable rate at the moment because interest rates are low.

But there are still very few fixed-rate or tracker deals to move to when interest rates rise, especially if the landlord has less than 25 per cent equity.’

Lenders are also increasingly reluctant to agree to a ‘consent to let’, when homeowners rent out their home. Nationwide recently announced it would impose a 1.5 per cent premium on the interest rate.

Source: ' Daily Mail '

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