Calling All Luton Investors! Sub-1% Mortgages Now Available for Buy-To-Let Properties
Yep, you read that right. Brand new sub-1% mortgage products have been launched that are specifically aimed at Buy-to-Let properties. Rare sub-1% deals have been spotted in the wild for owner-occupiers since summer, but The Mortgage Works from Nationwide is now offering this kind of rate to the investor too.
What Is It?
This is the first ever mortgage product available to landlords with an interest rate below 1%.
To put this into context, the lowest rate for a Buy-to-Let mortgage prior to this was 1.16% from Barclays.
After a decade or more of recovery from the global financial crisis, and mortgage restrictions tighter than Scrooge, lenders are awash with cash. This is great news for landlords in an investment hotspot like Luton.
The investment and rental markets are especially strong here, and we’re always on the lookout for new deals that can help Luton landlords keep that edge.
Lenders have money to throw around again, and are vying with each other for customers - and now, their price wars have finally spilled over into the investment market.
The result? Eye-catching headline deals that on the surface make it seem like Christmas has come early.
Let’s find out if it really has …
So What Is On Offer?
There are two key mortgage gifts being gift-wrapped in a shiny 1% bow:
1: Buy-to-Let deals from Nationwide come via The Mortgage Works branch of their business. The product causing a stir is their Buy-to-Let mortgage with an interest rate of just 0.99%, fixed for two years.
2: The Co-operative Bank’s Buy-to-Let arm is called Platform, and they are offering a two year fixed deal on a Buy-to-Let product with an interest rate that hits that magic 1% mark exactly.
Things You Need To Know
A sub-1% rate is headline-grabbing, but it’s always wise to read the small print; we’re a curious bunch at the Penrose hub, so we’ve read it for you. (Spoiler: You won’t be disappointed):
The Mortgage Works product
Aside from the need for a 35% deposit, the main challenge of The Mortgage Works offer seems to be the product fee - 2% of the loan amount.
We all know that fees are a part of mortgage life, and Buy-to-Let products have always demanded a higher rate than standard homeowner loans. But 2% is higher than usual.
For new investors with smaller budgets however, or established investors simply looking for properties at the cheaper end of the market, this sub-1% deal could be ideal.
The average Luton house price is currently £295,886 - up 8% on last year, but still just below the £300k threshold. Many of the smaller investment properties we sell in Luton sit comfortably below this figure.
For these kinds of investments, the 2% fee won’t make a significant dent in long-term profits, and the payoff will come as the mortgage term progresses. The absence of other strict criteria make this product a great deal for Luton investors who need a bit of flexibility.
The 2% could feel like a dealbreaker if your level of borrowing is high though - tempting as it sounds, the sub-1% won’t be the right choice for all investors, but if you have deeper pockets don’t leave just yet …
The Platform product
The small print on this one is more extensive, and it seems to be targeting investors who already have several properties: your Buy-to-Let portfolio can’t exceed three properties; your latest investment looking to secure this mortgage deal needs to be sitting in the 350k-500k price bracket; your household income has to be over £60k pa; and you’ll need a 40% deposit.
The big news here is the fee - it is set at just £2,450.
The Luton rental market is beautifully diverse, and demand remains high for properties of all kinds. This deal from Platform might not have the sub-1% claim, but it’s only 0.01% away from it, and the fixed fee makes it eye-wateringly attractive to investors who fit the criteria.
While all this small print might sound kind of onerous, let’s be honest - there is always something. And in this case we think it makes good business sense. The lenders are basically saying: ‘You can get this, but you need to prove you can afford it.’ Responsible lending, perhaps, or maybe just financial organisations trying to minimise their risk.
It’s most likely a mix of both, with a dash of we-need-to-do-something-to-get-investors-borrowing thrown in for good measure.
Whatever the motivations behind both products, breaking the 1% barrier is a first for Buy-to-Let mortgages, and it’s likely other lenders will jump on the bandwagon soon too. The opportunity to secure this kind of rate is one we think investors would be crazy to pass up.
Here’s why …
Why Landlords Need To Jump On This
The housing market has largely ridden the wave of the pandemic. Demand and supply have been whipped up into something of a frenzy over the last eighteen months, as the Stamp Duty holiday and carefully controlled interest rates provided much-needed stimulus to the housing market.
Smart government executives recognised that our homes became a focal point for a nation in lockdown, and with the economy in freefall it was vital to keep the housing market alive.
And quite right too.
But as we stagger back to normality, Stamp Duty is back at work, and the experts are predicting a rise in interest rates in December 2021, with further increases looking likely as we head into 2022. The offer of a mortgage rate at or below 1% is unsustainable for lenders in the long term.
These offers are designed to boost interest in the Buy-to-Let market, and once that interest has been resurrected, it’s almost guaranteed that rates will creep up again.
Both products mentioned in this blog are available on both purchase and remortgage arrangements. It’s a gift that won’t hang around, and successful investors won’t want to miss out on this.
In Summary …
Lenders appear to be targeting committed Buy-to-Let investors who know the game and understand the risks, which, given the economic uncertainty of late is perhaps no surprise … and is actually pretty sensible. No one wants lenders to be leading people down the dodgy road of unmanageable debt again. That would be bad for everyone.
Bottom line?
Our Penrose investment experts think these sub- and 1% offerings stack up to be a decent incentive for serious investors at every level who have a good handle on their finances.
If that sounds like you, get in touch today and our mortgage gurus help you secure a great deal before those interest rates have another growth spurt.