Mortgage Deals for Borrowers as Lenders Compete

Nationwide stole a lot of headlines recently when it introduced the first and only 10-year fixed rate buy-to-let mortgage in the UK. The deal is just the latest offer and represents good news for borrowers.

The Nationwide mortgage is available at a rate of 4.99 per cent with a £995 arrangement fee. However, borrowers must have a minimum deposit of 25 per cent.

The residential market is also looking good value for borrowers. Since the start of January we have seen lenders repeatedly undercut each other with a series of headline grabbing offers. First Direct lowered rates to 2.39 per cent on five-year fixed rates, albeit with a high arrangement fee (£1,450) and high deposit requirement (35 per cent). First Direct’s parent company, HSBC, has also pledged to match rivals’ rates on a number of products including two-year fixed, five-year fixed and lifetime trackers. The arrangement fees and deposits are quite steep though – £1,499 and up to 30 per cent respectively. Leeds Building Society has cut its rates by up to 0.49 per cent on several terms, including a five-year fixed rate of 2.64 per cent. The arrangement fee is more affordable (£800) but it requires a substantial deposit (at least 35 per cent).

Those keeping an eye on lenders’ rates and looking for mortgage deals may have noticed providers introducing long-term offers. In the current environment this is something of a win-win. Savers avail of rates that potentially represent good long-term value while providers lock in customers for the next few years. The Bank of England rate is at a historic low and the only likely direction is upwards, although the indications at the moment are that this will not happen until 2016.

Last April new lending rules were introduced to discourage lenders from approving soft loans and this seems to have had the desired effect. The downside for providers is that is left many of them playing catch-up with lending targets. Come the summer and we started to see announcement of better-value mortgage deals.

The Nationwide product, offered through its buy-to-let arm, The Mortgage Works, may appeal to landlords whose mortgage terms are coming to an end or whose properties are in stable tenancy areas, and who will not need to refinance loans during the ten-year period.

The buy-to-let sector has increased is size over the last year, according to the Council of Mortgage Lenders. There was a 9 per cent increase in volume and a 14 per cent increase in value in November 2014, compared to the same period last year. However, between October and November there was an 11 per cent fall. Whether that drop is part of a longer term pattern will become clearer over the next few months.