Flat fees for buy to let mortgages at lowest level for a year

The flat fees for buy to let mortgages are now lower than they have been at any point in the past 12 months, according the latest lending costs index.

The average flat fee among buy to let mortgage products fell by more than 5% in the second quarter of 2017, down to £1,370 from £1,446, the data from the index from Mortgages for Business shows.

The report says this will be welcome news to landlords favouring these fee structures, who stand to save an average of £76 in fees on every mortgage they take.

However, percentage based fees are becoming increasingly common with lenders and this is likely as a way to keep interest rates low while still allowing profits to scale with larger loans.

Percentage based fees now apply to 48% of buy to let mortgage products, having overtaken flat fees on product availability at the start of the year. These products have increased in number in every quarter since the second quarter of 2016.

‘With interest rates still at exceptional lows, it’s all the more important to make sure you look at any additional charges when taking a buy to let mortgage. It is therefore promising to see a reduction in the average flat fee charged for mortgage products,’ said Steve Olejnik, chief operating officer of Mortgages for Business.

He explained that with percentage fees becoming more common and no change in the prevalence of flat fees, it is only natural that there has been a reduction in the availability of fee free options.

Indeed, just 11% of buy to let mortgage products carried no arrangement fees in the second quarter of the year, down from 15% in the first quarter of 2017.

Meanwhile, separate research shows remortgaging volumes rose in May with the number of remortgage transactions increased by 8% month on month from 29,300 in April to 31,936 in May, according to the research from conveyancing service provider, LMS

Some 58% remortgagors said they expected no change in the average mortgage rate over the next 12 months, an increase from 53% who said the same in April. Borrowers were also encouraged by record low mortgage rates, as the average rate fell from 2.1% in March to 2% in April.

Andy Knee, chief executive of LMS, explained that the rise was probably due to predictions of a solid and positive election outcome. ‘Remortgagors were so confident that the outcome of the snap election would provide stability that over half said they expected low rates to remain in place for at least the next year,’ he said.

But some remortgagors were more cautious. A minority of home owners exercised caution and provisioned against the impact of a shock result as fewer remortgaged to reduce overall mortgage repayments, with only 15% citing this as their main reason for remortgaging, down from 17% in April.

This caution is also reflected as remortgagors took advantage of low rates and fixed for longer in May. Some 34% remortgaged onto a fixed five year deal in May, up from 8% home owners who previously had this product type before remortgaging.

The data also shows that the total value of remortgage transactions fell 1% between April and May from £5.1 billion to £5 billion.

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