Buy-to-Let Lenders Favouring Percentage-Based Fees
By |Published On: 20th April 2017|

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Buy-to-Let Lenders Favouring Percentage-Based Fees

By |Published On: 20th April 2017|

This article is an external press release originally published on the Landlord News website, which has now been migrated to the Just Landlords blog.

Buy-to-Let Lenders Favouring Percentage-Based Fees

Buy-to-Let Lenders Favouring Percentage-Based Fees

Percentage-based fees for arranging loans have become the new standard among buy-to-let mortgage lenders, according to the latest Buy-to-Let Mortgage Costs Index from Mortgages for Business.

Flat fees have long been popular as a way for lenders to maintain profitability, while still offering competitive rates. Meanwhile, other products instead carry a variable fee based on the loan amount.

Figures from the first quarter (Q1) of 2017 show that 44% of all buy-to-let mortgage products now carry percentage-based fees, overtaking flat fees (41%) for the first time in four years.

There was also a rise in the average flat fee, up to £1,446 from £1,397 in Q4 2016. Together, these changes have increased the average effect of mortgage charges to 0.64%. This compares to 0.62% in Q4, and is the strongest effect recorded since the first half (H1) of 2015.

Steve Olejnik, the COO of Mortgages for Business, comments: “With the challenges lenders have faced to generate business in the face of successive blows to the buy-to-let sector, it is only natural that many have chosen to focus on cutting rates at the cost of increased fees. The recent trend towards percentage-based fees is an example of lenders doing exactly this, as fees of this type become more expensive for larger loans.”

The index also shows that there has been a shift in the pricing of five-years fixed rate products. Although products available at 75% loan-to-value (LTV) and below remained on trend, five-year fixed at higher LTVs saw a 0.2% rise in headline rates.

This was fuelled by an influx of investor demand following tighter Prudential Regulation Authority (PRA) affordability guidelines, which only partially apply to long-term fixed rates.

Landlords, have you seen a move towards percentage-based fees from buy-to-let lenders in recent months? Will this affect your decision to take out a loan?

About the Author: Em Morley (she/they)

Em is the Content Marketing Manager for Just Landlords, with over five years of experience writing for insurance and property websites. Together with the knowledge and expertise of the Just Landlords underwriting team, Em aims to provide those in the property industry with helpful resources. When she’s not at her computer researching and writing property and insurance guides, you’ll find her exploring the British countryside, searching for geocaches.

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