Buy-to-let mortgage rates were largely unaffected by a strong rise in swap rates in the last quarter of 2016, but this is unlikely to hold true in 2017 believe experts.
The Mortgages for Business’ Buy to Let Mortgage Costs Index cites the Bank Rate remaining at its record low of 0.25 percent for the freeze.
The index recorded a slight rise in the rates for both fixed and tracker rates, but recorded a 0.3 percent drop in the average rate of high loan to value (80 percent plus LTV) fixed rate buy to let mortgage products.
It also recorded rates for tracker mortgages up to 65 percent LTV remaining comparatively expensive, averaging 5.17 percent in the quarter, compared to 4.84 percent for LTVs of 70-75 percent.
David Whittaker, chief executive of Mortgages for Business, said it was good to see that lenders had not passed on the cost of higher swap rates to landlords at a time when they were facing increased fiscal and regulatory burdens, but did not see the situation lasting.
"We would expect to see increases at some point in 2017 as lenders factor in the additional time spent on deeper background checks and assessing affordability, particularly from landlords borrowing in a limited company capacity."
Barry Fromson, a consultant at Ascot Lloyd, said he was witnessing nervousness from clients with substantial buy-to-let portfolios about rate rises, which was mirrored by conversations with real estate agents too.
"The ‘school of thought’ is that rates have held to help offset the potential downside from the proposed change in tax legislation which ultimately will increase taxes for clients holding bigger BTL portfolios," he said.
"As with any financial institution this position cannot be sustainable and would believe a rate rise is inevitable and would expect demand for BTL mortgages to soften with property values following suit.
Adrian Kidd, a lifestyle financial planner at Unleash Advice Partnership, cited the impact of rising US Treasury yields and the predicted higher inflation as triggers for higher swap rates.
"If we have persistent inflation we could get a 0.25 per cent rise. We are also never that far behind the US, where they are expected to make another few moves upwards in rates this year. Our interest rate curve has to go up."
