Type: Buy-to-let tracker mortgage
Tracker term: Until July 31, 2010
Tracker rate: 2.49% above the Bank of England base rate
Payable rate: 2.99%
Minimum loan: £25,001
Maximum loan: Up to 60% of valuation subject to a maximum of £1m, up to 50% of valuation subject to a maximum of £1.5m
Income multiples: Rental income must be at least 125% of the mortgage repayments
Arrangement fee: 3.5% of the original loan subject to a £595 minimum
Redemption fee: None
Introducer’s fee: Refer to lender
Tel: 0845 6010763
This buy-to-let mortgage tracks at 2.49 per cent above the Bank of England base rate until July 31, 2010 and is available for loans up to 60 per cent of valuation.
Unleash Advice Partnership IFA Adrian Kidd says: “You cannot argue with the rate. It is one of the lowest, if not the lowest, buy-to-let rates I have ever seen. That said, why would you advise a client to lock in to a one year product when the revert rate is 4.69 per cent and the expectation is that rates will go up next year?”
He says the only reason that he can see this being sold to people is that the rental calculations may be tight, so this gives an option to those who are struggling to manage their payments.
Warming to the theme of the potential drawbacks of this deal, Kidd says: “The arrangement fees are silly, but that said, they are all expensive now for lenders across the board which tells us all something.”
He adds that if landlords are going to remortgage every year, then this becomes very costly, but it may be the reality until confidence returns. He expects this to happen around the middle of 2010.
“If The Mortgage Works is going to charge those fees at a low LTV of 60 per cent, then it should at least make the rental calculation more generous and do it at the payrate,” he says. Rental income must be at least 125 per cent of the monthly mortgage repayments, based on 4.49 per cent rather than the 2.99 per cent pay rate.
Highlighting buy-to-let deals that are likely to provide the main competition Kidd says: “There is not much out there anyway, but Cheltenham & Gloucester has some okay rates. The Mortgage Works also has better value fixed rates that I would recommend over this product.”
Summing up Kidd says: “I am waiting with bated breath for someone who can lend responsibly in the buy-to-let arena and take it by the short and curlies by charging arrangement fees of no more than £1,500, including a valuation perhaps.”
He adds that lenders who are prepared to do this would get some great business for LTVs at 60 per cent and below which would represent a small risk. “The reality is that people do not want to lend to wannabe property developers.” he says.
Suitability to market: Average
Competitiveness of rate: Good
Adviser remuneration: Poor