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Rising swaps push up Buy 2 Let three- and five-year fixes by 0.25% since May

Buy-to-let three- and five-year fixed rates are up 0.25 per cent on average since May, according to research from buy-to-let brokerage.

The steady rise in swap rates since May has seen the average three- and five-year buy-to-let fixed rate rise to 5.25 per cent and 5 per cent, including fees, respectively.

Swap rates, which lenders use to hedge potential interest rate rises and are closely linked to mortgage pricing, spiked in June after the US Federal Reserve hinted it could wind up its program of quantitative easing.

At the start of May three- and five-year swaps bottomed out at 0.65 per cent and 0.91 per cent respectively, before spiking in June and then peaking at 1.32 per cent and 2.01 per cent by mid-September. Since then three- and five-year swaps have fallen back to 1.12 per cent and 1.76 per cent, respectively, as at 14 November.

In a report on the state of the buy-to-let market, published today, Mortgage for Business warns buy-to-let mortgage pricing is likely to continue to increase.

The report says: “To date, these increases have been nowhere near as large as the increases in the underlying swap rates which have risen by around 0.5 per cent for three-year swaps and 0.9 per cent for five-year swaps.

“Whilst this is a positive sign of increased competition in the market and of the positive effects of the Funding for Lending scheme, it is likely that ultimately there will be some ‘catch-up’ in the cost of products.”

In the third quarter there was a small rise in the cost of lender arrangement fees, valuation fees and legal costs which added an average of 0.52 per cent to the headline cost of a buy-to-let mortgage, up from 0.5 per cent in the second quarter.

For the second quarter in a row, 7 per cent of the 479 buy-to-let products currently on offer had no arrangement fee.

Half of all buy-to-let products in the third quarter had a flat arrangement fee, down 3 per cent from the second quarter, meaning the proportion of percentage-based fee products crept up to 43 per cent.

The total number of buy-to-let products increased by 21 to 479 this was between, the second and third quarters. There are currently 28 active lenders in the buy-to-let market.

For more help and advice on the Buy 2 Let market please contact us @HoskinMortgages.

Kind regards Clare Allen at Hoskin Mortgages


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