November 16

Don’t delay – review your buy-to-let mortgage before it’s too late

Why now is the time to consider a new fixed rate mortgage

It appears that the end of super low-interest rates is upon us. For many buy-to-let landlords, just the thought of higher mortgage payments is enough to make them jittery. The buy-to-let mortgage payment is usually the highest amount in the debits column of buy-to-let finances. When interest rates increase, cash flow decreases.
You’ll want to consider what strategies property investors use to beat rising interest rates, including reviewing your mortgage arrangements.
In this article, we ask if you should remortgage before the end of your mortgage’s fixed term period.

Are mortgage interest rates rising?

In the last couple of years, the mortgage market has become highly competitive. Lenders have rushed to cut rates to lend more. There are signs that this process is reversing. Data from Moneyfacts, the financial products comparison company, shows that more than 20 mortgage providers raised their mortgage rates in the first week of October alone. More have increased rates since.
If buy-to-let mortgage interest rates rise by just 1%, the investor with a mortgage of £150,000 will be paying £125 per month more in mortgage interest payments. Over two years, that’s £3,000 more. A big hit to cash flow and buy-to-let profits.
If you aren’t currently on a fixed rate mortgage, it could be worth considering switching your mortgage to a fixed rate product.

Should you review your fixed rate mortgage?

If your buy-to-let mortgage is currently at a fixed rate, you’re protected from the effects of interest rate rises. But only until your fixed rate expires. When that happens, your monthly mortgage interest payments could be a lot higher than today, especially if the Bank of England (BoE) raises base rates several times before then.
Financial markets are indicating that the BoE base rates are set to rise from 0.25% currently to between 0.45% and 1% within two years. Therefore, two-year fixed rate mortgage interest rates are rising in anticipation.
We’d recommend reviewing your mortgage now. You could benefit from a cheaper rate than the one you’re paying today. If you don’t act quickly, a new fixed rate deal could be much more expensive than it is currently. And if you don’t act before the BoE raises the base rate, you’ll find the cheapest fixed rates have disappeared.

What should you check?

Before you rush to switch your current fixed rate with a new rate, you should check to see if your mortgage will suffer an early repayment charge. These can be hefty, and so might negate any benefit of switching. You will need to weigh up the financial benefits of switching (how much interest you could save) versus the cost of early repayment of your current mortgage.
If you don’t have an early repayment charge, or if it is small, the next thing to consider is the fixed rate you could get today compared to the rate you are currently paying. Work out whether it will save you money over the remainder of your fixed period, and how much.
Next, consider whether there are any arrangement fees for the new mortgage, and how much these are. Ask how these will impact your mortgage payments, and how much you owe. Again, the cost could be worth it in the medium to long-term.
Another consideration should be peace of mind. If your current fixed rate deal expires in 12 months, would you find it easier to sleep at night by obtaining, say, a five-year fixed deal while interest rates are still low now? There’s a lot to be said for the certainty of mortgage payments in such an uncertain world.

When should you review your mortgage?

The sooner, the better is the easy answer. The remortgage process can take several weeks, so starting early is key to getting the best result. Typically, a mortgage offer will remain valid for three to six months, so you could lock in a rate now and then switch in the new year. It will protect you from interest rate rises between now and then.
You should search across a broad spectrum of lenders. When you do so, don’t simply consider the interest rate. Other conditions and clauses, such as early repayment penalties and set-up charges, should also be factored into your financial considerations. And as previously mentioned, you may wish to consider the length of the fixed rate term. Remember, though, that the fixed rate term will end on the anniversary of acceptance and not on the anniversary of when you start the mortgage.

How can you cut out the hard work of finding a great fixed rate mortgage?

There is a lot of legwork involved in reviewing your mortgage and finding the best replacement. You’ll want to avoid making multiple applications too, as this could affect your credit rating.
We always recommend using a mortgage broker with specific buy-to-let experience. It’s their job to stay in touch with market developments, new products coming to the market, and regulation changes. They’ll do the donkey work more efficiently and effectively, and ensure your mortgage is the best for you in your unique situation.
Contact one of the Ezytrac team today on  +44  01522  503  717., and start the conversation about your property portfolio. We’re on the side of landlords and investors: we want you to maximise your buy-to-let profits through great investment property management and wise investment strategies and decisions.
Yours in effortless property management,
Brett Alegre-Wood MARLA MNAEA


buy-to-let mortgages

You may also like

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}


Chat to the Team

We're always ready to provide our thoughts. Enter your details and we'll return your call or simply call (+44) 01522 503 717