The Manchester Building Society has launched two new 25 year fixed rate BuyToLet mortgage products with a 5.74% and 5.99% notional rate.
In the years I have been working in this industry and certainly since the popular advent of BuytoLet I have never before seen a 25 year fixed rate BuytoLet mortgage. The longest term I can remember is a 10 year fixed. This is certainly very surprising and confidence boosting considering the current economic climate and I have detailed the full costs and criteria below.
5.74% fixed for the term of the mortgage: available for repayment mortgages
5.99% fixed for the term of the mortgage: available for interest only mortgages
(The mortgage term must be between 10 – 25 years)
- Interest rate 5.74% or 5.99% fixed for the term with no reversion rate
- Early repayment charges of 1.5% for months 0-60 and 0.75% for months 61-84 (penalty is only for the first 7 years)
- Up to 10% of the mortgage balance can be repaid each year penalty free
- Lenders arrangement fee of only £749 and can be added to the loan as long as it does not exceed 75% LTV in total.
- A valuation fee will be applied depending on the value of the property e.g. up to £100,000 = £235 fee
- The overall cost for comparison is 6.0% APR at 5.74% or 6.3% APR at 5.99%
Key Lending Criteria:
- Maximum Loan to Value 75%
- For 5.74% fixed the Interest cover is 125% of the interest only mortgage at 5.74%. This means you can borrow up to 167.24 times the monthly rental income or
- For 5.99% fixed the Interest cover is 120% of the interest only mortgage at 5.99%. This means you can borrow up to 160.26 times the monthly rental income.
- Minimum Property value of £125,000
- Applicants must not be First Time Buyers and have no more than 4 BTLs in their portfolio including the proposed mortgage to the Manchester Building Society
- Minimum applicant income is £30,000 for single and £40,000 for joint applications and proof is required
- Minimum age of applicants is 30 years old
- Only one AST is acceptable with no HMOs
- New build properties are considered
- No Studio flats, above commercial or over 4 stories
- Not available in Scotland or Northern Ireland
Mark Alexander, founder of property118.com and professional portfolio landlord commented:-
“I’m just gutted that this product has been launched by a lender which prefers to target landlords with 4 or less buy to let mortgages. Why is it that some lenders prefer to deal with newbies than established portfolio landlords with nearly quarter of a century of experience like me? Now that does not make sense to me, does it make sense to you?
In my opinion a 25 year fixed rate BuyToLet mortgage is a fantastic product for professional landlords as well as newbies as it provides certainty. Rental income will no doubt rise and so will property values over a 25 year term but landlords will be able to rest assured that their mortgage interest payments and loan balances on interest only mortgages will remain unchanged.
I suspect this 25 year fixed rate BuyToLet mortgage will be a very popular product, especially as the Bank of England see’s the “natural interest rate” in the UK being around 5%. The headline rate works out at circa 2% over base for the entire term if the BoE are right. If interest rates were to reach the dizzy highs of 15% as they were in the early 1990’s this would wipe out most landlords within 6 months.
The hope for professional landlords like me is that lenders such as TMW and Paragon will spot that a market really does exist for such a product. Hopefully they will release similar products which professional landlords will be able to switch over to. Don’t you think that would make sense to them too? I’m sure this funding is priced at a higher margin than pre-credit crunch tracker products and the certainty of the rate must surely provide them with reduced risks too don’t you think?
We know that lenders read your comments so if you would like to see more products like this launched please state your reasons in the comments section below. What you say may well influence lenders decisions.”
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About Neil Patterson
Neil's career began in banking in 1990. He has also managed a building society branch and worked in business development. He became an Associate Partner of The Money Centre in 2003 and subsequently took on the role of Head of Operations which included training, quality control, project management and compliance. Neil has been a Partner of Property118.com since day one, responsible for operational management which includes, amongst many other things, updating the buy to let mortgage sourcing calculator and quote engine.