Lowest ever BTL interest rates released!

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Lowest ever BTL interest rates released!“Lowest ever BTL interest rates released!”

It’s a great headline grabber isn’t it?

Well I actually saw this on another property forum and I thought I ought to respond.

Today (Friday 21st June 2013), TMW launched a new range of products including a new 2.49% BTL rate. However, is THIS now the best “lowest ever BTL interest rate”?

Is it true that borrowers really do fall for the headline interest rate only, or do they look for the ‘catches’?

Please allow me to explain ……

Without professional Broker support, many (not all) borrowers are indeed attracted to rates, and we have seen many times that there is however one massive ‘catch’.

The biggest failure of a DIY mortgage arrangement is that the products behind some headline grabbing promotions are sold by a non-advised ‘service’.

There are no Broker fees - but you get what you pay for.

Many times, every day, we carry out specific research for our Clients and here is one example of how the ‘wrong’ “low interest rate” product can cost thousands of pounds more than a higher rate deal.

Here is a table of results – all for a £60,000 BTL interest only mortgage, based on a property value of £120,000 – in ‘Total To Pay’ (TTP) order.  TTP, by the way, is the figure produced when fees such as valuation fees, lenders arrangement fees as well as initial and also reversionary % rates and monthly payments are ALL factored in.

The following table is the top 70 (why 70? – look at no. 65 for the answer!) based on a £60k BTL mortgage in TTP order over a ten year period;

 

Type

Initial Rate

Initial Pay

Period

Final Rate

Fees

Cashback

Total to Pay

1

V

3.29

164.5

3.29

1999

0

81,759

2

V

3.49

174.5

3.49

999

0

81,959

3

V

3.79

189.5

3.79

1999

0

84,759

4

T

3.79

189.5

3.79

1999

0

85,089

5

T

3.65

182.5

31/10/2015

4.5

495

0

86,705

6

F

3.79

189.5

31/10/2015

4.5

495

0

86,880

7

T

3.89

194.5

31/10/2015

4.5

495

0

87,005

8

F

4.09

204.5

31/10/2015

4.5

495

0

87,255

9

F

3.99

199.5

01/10/2018

4.79

1500

750

87,312

10

T

2.59

129.5

2 Years

4.74

1500

250

87,370

11

T

3.39

169.5

31/10/2015

4.5

1495

0

87,380

12

F

3.39

169.5

31/10/2015

4.5

1495

0

87,380

13

F

2.59

129.5

02/08/2015

4.74

1500

250

87,478

14

F

4.09

204.5

01/10/2018

4.79

1500

750

87,617

15

T

3.59

179.5

31/10/2015

4.5

1495

0

87,630

16

F

3.59

179.5

31/07/2015

4.74

500

0

87,695

17

F

3.99

199.5

02/08/2018

4.74

1495

250

87,733

18

F

3.99

199.5

01/10/2018

4.79

1995

750

87,807

19

T

2.99

149.5

2 Years

4.74

1495

250

87,845

20

T

2.59

129.5

2 Years

4.74

1500

0

87,880

21

F

3.79

189.5

31/10/2015

4.5

1495

0

87,880

22

F

2.99

149.5

02/08/2015

4.74

1495

250

87,933

23

T

3.75

187.5

01/10/2015

4.79

995

750

87,947

24

F

3.75

187.5

01/10/2015

4.79

995

750

87,947

25

F

2.59

129.5

02/08/2015

4.74

1500

0

87,988

26

F

3.39

169.5

01/10/2015

4.79

1500

750

88,002

27

T

3.39

169.5

01/10/2015

4.79

1500

750

88,002

28

F

3.59

179.5

01/10/2016

4.79

1995

750

88,027

29

F

3.89

194.5

01/10/2016

4.79

1500

750

88,087

30

F

4.09

204.5

01/10/2018

4.79

1995

750

88,112

31

F

4.19

209.5

31/07/2018

4.74

1249

0

88,114

32

F

3.39

169.5

31/07/2015

4.74

1249

0

88,224

33

F

3.99

199.5

02/08/2018

4.74

1495

0

88,243

34

T

3.99

199.5

01/10/2015

4.79

995

750

88,247

35

T

3.35

167.5

2 Years

4.74

1495

250

88,277

36

F

3.99

199.5

31/07/2018

4.74

1999

0

88,284

37

T

2.99

149.5

2 Years

4.74

1495

0

88,355

38

F

4.09

204.5

01/10/2015

4.79

995

750

88,372

39

F

3.69

184.5

01/10/2015

4.79

1500

750

88,377

40

T

3.69

184.5

01/10/2015

4.79

1500

750

88,377

41

F

4.05

202.5

01/10/2016

4.79

1500

750

88,383

42

F

3.79

189.5

01/10/2016

4.79

1995

750

88,397

43

F

2.99

149.5

02/08/2015

4.74

1495

0

88,443

44

T

3.99

199.5

01/10/2015

4.79

1200

750

88,452

45

F

3.49

174.5

02/08/2015

4.74

1495

250

88,508

46

F

4.09

204.5

01/10/2015

4.79

1200

750

88,577

47

F

3.48

174

01/10/2015

4.79

1995

750

88,610

48

F

5.09

254.5

01/10/2015

4.79

0

750

88,627

49

F

3.89

194.5

01/10/2018

4.79

2495

0

88,752

50

F

3.19

159.5

31/07/2015

4.74

1999

0

88,754

51

T

3.35

167.5

2 Years

4.74

1495

0

88,787

52

F

4.29

214.5

01/10/2015

4.79

1200

750

88,827

53

T

4.29

214.5

01/10/2015

4.79

1200

750

88,827

54

F

4.59

229.5

01/10/2018

4.79

1200

750

88,842

55

F

4.59

229.5

01/10/2016

4.79

995

750

88,877

56

F

4.49

224.5

01/10/2016

4.79

1200

750

88,897

57

F

4.68

234

01/10/2018

4.79

995

750

88,912

58

F

3.75

187.5

01/10/2015

4.79

1995

750

88,947

59

V

4.49

224.5

4.49

1999

0

88,959

60

F

3.49

174.5

02/08/2015

4.74

1495

0

89,018

61

F

3.99

199.5

01/10/2018

4.79

2495

0

89,057

62

F

3.74

187

31/08/2015

4.99

0

0

89,103

63

F

4.29

214.5

31/07/2018

4.74

1999

0

89,154

64

F

2.49

124.5

31/08/2015

4.99

1500

0

89,165

65

F

3.69

184.5

31/08/2016

4.99

995

0

89,260

66

F

4.69

234.5

01/10/2016

4.79

1200

750

89,267

67

V

4.48

224

4.48

1999

0

89,299

68

F

3.69

184.5

31/07/2015

4.74

1999

0

89,304

69

F

5.65

282.5

01/10/2015

4.79

0

750

89,327

70

F

4.85

242.5

01/10/2016

4.79

995

750

89,358

The number 1 lowest rate BTL deal available in today’s market is actually number 65 in the best value charts.

What’s cheaper?  A 2.49% rate deal, a 3.29% deal or even a 4.09% rate deal?

So, using the facts from the table above, if you are attracted to the “Lowest ever BTL interest rate” (2.49% in position 65) and you rush in without advice and proper scrutiny (usually to save a few hundred pounds on Broker Fees!), you could end up paying approximately £8,000 MORE over 10 years for the same £60k deal (no.1 deal at 3.29% and even the number 8 deal at 4.09% is cheaper overall!).

£8,000!?  That’s a lot of rental income and cashflow ’wasted’, just to save on a Broker Fee.

What do you want? The lowest rate product sold to you by a non-advised entity, or the lowest ‘total cost’ deal properly sourced and secured for you by a professional whole of market Adviser?

To summarise my point above, our repeat Clients (many of whom have been with us for the 20+ years we’ve been in business) instruct us – and recommend us – time and time again because they receive BEST VALUE financial planning advice.  One of our most prolific buying Clients has a property portfolio in the hundreds, and has arranged every single BTL deal he has via my Firm.  He is of course feted by his own bank and many others who want his business, however he has stayed loyal to us (and continually recommends us) as our service (albeit fee charging) helps him to CUT costs, secure best TTP value arrangements, and importantly we ensure the necessary flexibility and ‘back office’ whole of market service that assists his continued business management and growth.

This is NOT an advert for me and my Firm (it could be misconstrued that way, I agree), but actually it IS a promotion for all borrowers to always instruct whole of market advice, however for those who buy ‘best ever lowest rate’ deals without full and diligent scrutiny of the whole TTP calculation, as well as not properly understanding criteria and forgetting to look to flexibility for changes for potential future requirements too, then as the saying goes .. caveat emptor.

Contact Howard Reuben

Mortgages, Commercial and Bridging Finance, Life Insurance, Wills, Trusts and LPA's
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Comments

  • The issue which concerns me the most is: which lenders tie their rates to base rate?

    If a lender says the rate is 2% over SVR (ie standard variable rate) that could be anything, because svr is what the lender says it is.

    2% over base rate however means that you know exactly how your payments are going to be calculated.

    I’ve got several mortgages on a base rate basis and two on svr basis. Guess which are the lower rates.

    So please can we know which lenders are charging borrowers based on base rate please?


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  • @ejcowper Lenders have a range of mortgage deals and you could find from the same lender those that offer tracker rates whilst at the same time offering fixed rates, LIBOR linked, discounted and variables rates too.

    You’ll also find that some lenders (including Melton Mowbray who did this yesterday) will pull their whole range of deals only to replace them with a new structured range based on new sets of underlying policy and criteria.

    The answer to your query? On the day you source a new mortgage (or remortgage) deal, grab the available product that meets your criteria and is right for you in terms of initial % rate, fees and reversionary rate too.


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  • My criteria is simple.
    What is the lowest cost of purchase subject to no early repayment charges or overpayments.
    It may well be that the up front charge is a little large but this, I have found, is more than offset by satisfying the above criteria.
    I can’t see how an adviser would help in this situation.
    Having said that, I do not go for high leverage.


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  • Paul Barrett Member Profile Deleted says:

    Give me a low interest rate fixed for say 3 years on IO which reverts to 1% A BOE BR
    for the following 30 years!
    Bet there isn’t one lender out there that would do that!
    I would take the risk of being tied to the BOE rate; why won’t the banks.
    Is it perhaps they realise that we are in for a decades of low BOE interest rate.
    This is why they want to control things by using their own greedy SVR’s.
    The greedy sods all want you on their useless SVR’s.
    Yeah like I trust a bank to keep their SVR aligned with the BOE rate!!?
    Let’s have the banks passing on the benefits of low BOE rates.


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  • @Paul My article starts off by saying “Without professional Broker support, many (not all) borrowers are indeed attracted to rates”….

    I do absolutely acknowledge that not all property investors need professional Advice support all the time, so I concur that for some people DIY is absolutely fine.

    However, please do not mistake an Adviser for a mortgage salesman.

    Two, very completely, different entities.

    Your comment of finding a product where you can overpay is great (as long as you can find that most appropriate deal in the first place) but OUR role as ADVISERS is to “secure best TTP value arrangements, and importantly we ensure the necessary flexibility and ‘back office’ whole of market service that assists his continued business management and growth.” … which was my comment re one of our Clients, to amplify the ‘service’ we provide.

    The whole article above is not just about pointing people in the direction of a product, but in providing a fully comprehensive support in liasing with surveyors, estate agents, conveyancers, underwriters, BDM’s as well as the time in fully researching, submitting, ‘down value’ appealing, and final document checking throughout the whole process.

    Most people (in my experience) do NOT want the hassle or inconvenience of having to deal with all of this pre-application and pre-completion stuff, especially when they have their own very busy lives and jobs/businesses to deal with anyway.

    So, you are absolutely right that your ‘post completion’ management of your mortgage account is crucial, but as we know many ‘DIY’ people fall down before completion because of issues during the application process.

    I trust that clarifies my thoughts when writing that article.

    @Paul Barrett – absolutely! :-)

    Howard


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