Some landlord borrowers may be thinking about opting for a variable/discount/tracker rate right now over a shorter time period as they wait to see how fixed-rates might move over the course of the next six to 12 months.
And although swap rates did fall off their Autumn 2023 highs, in recent weeks they have begun to creep back up.
That is important for product pricing, says Steve Cox, chief commercial officer at Fleet Mortgages, particularly in BTL where the capital markets fund many lenders.
Even though Fleet is not funded in this manner, Cox explains the lender still has to respond to competitors and what is happening in the wider market.
He adds: “We believe that affordability begins to work ‘normally’ again when rates are around the 5 per cent mark, and we have inched closer to that mark, so we will have to see where rates move next.
“Also, something to point out is that seven and 10-year money is cheaper than two and five-year at the moment, which means landlord borrowers might want to opt for longer fixes in order to take advantage of the cheaper pricing.”
Protection and responsibilities
With many landlords facing challenges this year, BTL insurance, often known as landlord insurance, has grown in popularity over the years.
There are different levels of cover available including owner’s liability and loss of rent cover if the property was uninhabitable.
There are a variety of rent guarantee insurance policies available on the market that could help to cover the risk of non-payment of rent.
Riz Malik, director at R3 Mortgages, says wherever possible landlords should ensure they have the capacity to deal with rental voids or non-payment of rent in the current market.
He adds: “Even if tenants are unable to pay their rent, the landlord is still obligated to meet their mortgage debt obligations.
“Failure to service the mortgage may have an impact on their credit and, as a result, their ability to obtain future financing.”
Shave adds: “Many landlords focus on the yield. That is certainly a key aspect but a landlord has a legal obligation to a tenant and this is an area that I only see getting more onerous for the landlord as governments, quite rightly, look more into tenants rights.
