Buy to let slows as mortgage rate offers begin to increase

Posted by Kelly Luff in Mortgages on 7 December 2016 - Kelly is a Marketing Executive at checkmyfile

In the last few years we have not only seen some historically low mortgage rates, but also a rush to make property investments. Now the tide may finally be turning, as lenders begin to increase their lowest mortgage rates, and buy-to-let figures drop in the wake of new regulations.

HSBC has now increased its lowest ‘cheapest-ever’ mortgage rate of 0.99% for two years by 0.5%, following on from other lenders gradually removing some of their most competitive products from the market. This perhaps signals that lenders are beginning to feel the jitters of a nervous post-referendum UK, particularly as warnings of increasing inflation in the New Year threatens to push people to tighten their belts.

David Hollingworth at broker London & Country Mortgages said, “The bottom of the market may have been hit. This [announcement] and the broader changes from HSBC, which has been very aggressively priced in the fixed-rate market, could spell the end of the sub-1% fixed rate, but also signals a potential turning point for fixed mortgage rates.”

Buy-to-let activity has also dropped away, to the tune of 18.5% as a series of Stamp Duty & tax changes has made the investment a less attractive proposition. Buy-to-let mortgages have also been tightened up by many lenders, with would-be landlords now needing a bigger deposit to secure their property investment.

With the announcement by the Chancellor that he will ban letting agent fees being passed onto tenants, there are further reasons for the buy-to-let money machine to slow its churn.

With buy-to-let slowing, there is every chance that this will be reverberated within the housing market, which has for some years now depended on buy-to-let investment to remain buoyant. This fact may also be impacting on the gradual increase in mortgage rates, as lenders await a house price slowdown and therefore slightly more risk on their side.

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