Pink Home Loans has introduced a buy-to-let mortgage that is fixed at 6.99 per cent until September 30, 2005.
The mortgage is available for loans of up to 85 per cent of valuation and up to five properties can bought within a maximum advance of £500,000.
If borrowers redeem this mortgage during the fixed rate period, they must pay an early redemption penalty of 6 per cent of the advance in the first year, 5 per cent in years two and three and 4 per cent in year four.
A survey by the Association of Residential Letting Agents in June 2001 shows that the average value of buy-to-let property in the South East is now £168,000 compared to £92,000 for all other regions. This suggests it might be more difficult for borrowers in the South East to jump on the buy-to-let bandwagon because prices are spiralling up.
According to Business Moneyfacts on July 27, 2001, this is the only buy-to-let mortgage of this type which is available for loans of up to 85 per cent of valuation. However, borrowers can get a lower four-year fixed rate at 6.64 per cent for loans of up to 80 per cent with Leeds & Holbeck.
This mortgage allows a maximum of three properties to be bought within the same maximum advance of £500,000 and this is more restrictive than Pink Home Loans. This may put off people in areas where property is more affordable.
Borrowers who redeem the Leeds & Holbeck mortgage during the fixed rate period must pay a six months' interest penalty, but this is lower than Pink Home Loans.
Borrowers who redeem a £300,000 mortgage must pay £10,260 with Leeds and Holbeck or between £12,000 and £15,000 with Pink Home Loans.