Buy to let mortgage rates set to rise

Buy to let mortgage rates are beginning to move higher as lenders respond to rising swap rates, with several providers repricing or withdrawing deals, research reveals.

Moneyfactscompare.co.uk says that average two- and five-year fixed BTL rates now stand at 5.32% and 5.70% respectively, up from 5.29% and 5.66% on 1 September.

HSBC increased its buy to let rates yesterday by up to 0.16%, while NatWest raised rates by 0.10% on Saturday and by as much as 0.25% through its intermediary arm.

Coventry Building Society has increased rates by up to 0.20% and Leek Building Society by up to 0.13%.

Swap rates bite

The platform’s finance expert, Rachel Springall, told Property118.com: “The pricing margins among major lenders are under pressure due to renewed volatility in the swap rate market, so it is somewhat inevitable for them to adjust rates.

“The recent uplift in swap rates has started to filter into the pricing of fixed rate mortgages, with more moves expected in the coming days.”

She added: “Swap rates are much higher than they were a month ago and are a key influence on how lenders price their fixed-rate mortgages.

“Lenders look at margins very carefully, so it would be unwise to price their deals too low, if the expectations are for interest rates to rise, even if over the short-term.”

More rises expected

Family Building Society withdrew its fixed buy to let range on 4 September, and it has yet to return.

Limited edition products from CHL Mortgages and ModaMortgages were also withdrawn at the close of business on 3 September.

Moneyfacts said further changes look likely to come through over the next few days as lenders catch up with higher wholesale funding costs.

Nathan Emerson, the chief executive of Propertymark, said: “Over the coming weeks, we will see further details of how the Bank of England feels the direction of travel should develop regarding the base rate.

“We will also see what key details will be announced regarding housing within the Autumn Budget.

“Both factors will determine future sentiment within the housing market over the coming months.”

Budget will play a part

Commenting about residential rate rises from Barclays HSBC and NatWest so far this month, Hina Bhudia, a partner at Knight Fank Finance, said: “Lender margins are extremely thin, which leaves them vulnerable to the kind of moves in swap rates that we’ve seen over the past week.

“Tensions in the Middle East and a broad selloff in government bonds have pushed swaps higher, leaving the lenders with few options but to reprice higher.”

She added: “The upcoming Budget adds additional uncertainty to that question; speculation about whether the government will show enough fiscal restraint has fuelled volatility in mortgage markets in recent years.

“Until there is greater clarity on both fronts, it’s difficult to see mortgage rates easing to a point that would unlock a meaningful rise in buying activity.”