Pink Home Loans is adding to the growing buy-to-let market with the exclusive buy-to-let tracker mortgage.
Introduced straight after the Bank of England cut its base rate to 4.75 per cent, the mortgage has an interest rate set at 0.99 per cent above the base rate for the first three years, giving it a payable rate of 5.74 per cent. After the first three years it will revert to 1.75 per cent above the base rate.
The mortgage is available for loans of up to 85 per cent of the value of the properties bought, with the maximum amount set at £1m. It can be used to buy up to 10 properties, which can then be let out.
Pink Home Loans has set a redemption penalty of 4 per cent of the advance in the first year and 3 per cent in the second and third years. The mortgage also comes with an arrangement fee of £299.
The buy-to-let market has seen a large amount of growth over the last 18 months. According to the Council of Mortgage Lenders, in the first half of 2000 there were 80,200 buy-to-let mortgages outstanding, with a total value of £6bn. By the first half of 2001 this had increased to 130,000 mortgages, with a total value of £10bn.
There are cheaper three-year base rate tracker buy-to-let mortgages on the market at the moment. According to Business Moneyfacts on September 25, 2001, the lowest rate around is provided by Exclusive Connections. This has a rate of 0.7 per cent above the Bank of England base rate for the first three years for loans of up to 85 per cent of valuation. It then reverts to 1.2 per cent above the base rate.
However, although it has a lower rate, the Exclusive Connections can only be used to buy up to five properties, with a maximum loan limit of £500,000. It also has less competitive redemption fees than the Pink Home Loans product. If the Exclusive Connections mortgage is redeemed in the first five years then borrowers will have to pay a fee of 5 per cent in the first two years, 4 per cent in years three and four and 3 per cent in year five.