A new report revealed a staggering number of landlords are sat on their mortgage lender’s SVR. How much could you be saving, and what are your mortgage options?
According to a new report from UK Finance, a substantial 360,000 UK buy to let mortgage holders are currently sat on their lender’s Standard Variable Rate (SVR). This is a shocking number, with the current average SVR at 9.10%, according to our in-house buy to let sourcing system.
As a comparison, the average 5-year fixed rate for individuals is 6.34% and 6.56% for Limited Companies*. This means many of you are paying nearly 3% more in mortgage interest than necessary, so what should you do?
How much could I save?
If you’re currently sitting on your lender’s SVR, or if you’re putting off your remortgage options, it’s crucial to bear in mind how much you could be saving by securing a new mortgage rate.
For example, on a £200,000 interest-only mortgage with the average lender’s SVR of 9.10%, you can expect to pay:
|
Monthly repayments |
£1,516.67 |
|
Annual repayment |
£18,200 |
|
5-year cost |
£91,000 |
In contrast, for the same loan amount on a 6.59%* rate with a lender arrangement fee of 2.5% (paid upfront), you would pay:
|
Fees |
£5,000 |
|
Monthly repayments |
£1,095.33 |
|
Annual repayment |
£13,180 |
|
5-year cost |
£70,900 |
Furthermore, even by adding your fees to the loan for the same 6.59%* 5-year fixed rate, you can still expect to save significantly:
|
Fees |
£5,000 |
|
Monthly repayments |
£1,125.79 |
|
Annual repayment |
£13,509.50 |
|
5-year cost |
£72,547.50 |
As demonstrated above, fixing onto a new mortgage rate now could save you thousands of pounds over the initial 5-year fixed rate period. Many landlords may be hedging their bets and holding out for interest rates to come down, but even delaying by a few months could see your mortgage repayments rise significantly.
So, if you are on your lender’s SVR, what are your savings options?
Remortgage
The past few years have seen mortgage interest rates increase considerably, and with fourteen consecutive Bank of England Base Rate (BBR) rises, it’s understandable that property investors had put off their remortgage plans. However, BBR has stabilised, and inflation is on a positive downward trajectory, meaning mortgage lenders have regained confidence in the money markets.
As such, mortgage interest rates are coming down, and we’ve settled into a ‘new normal’ of interest rate pricing. Industry experts predict that we will see mortgage rates remain at their current levels going into the new year, with BBR not expected to decrease until late 2024.
For landlords still hoping to secure a lower mortgage interest rate, it may be worth exploring your options to save you money. Many lenders (although not all) will allow you to take advantage of today’s pricing by securing a new rate now, but will allow you to switch to a more competitive rate should one come available before you complete.
Mortgage lenders are also looking for innovative ways to benefit landlords and improve their product offerings. For example, one lender is offering landlords who, due to tightened stress testing, are now struggling to secure a new mortgage an ‘SVR Buster Range’.
These products are for clients looking for like-for-like remortgages (where you will not raise any additional funds) at an Interest Cover Ratio (ICR) of 100% instead of a typical 145% for individuals and 125% for Limited Companies. These rates offer various options for arrangement fees and will refund the applicant’s valuation fee up to a maximum of £1,000, making it a uniquely competitive offering.
Speak to one of our expert mortgage brokers to discuss what remortgage options may be available to you.
Product transfer
If you’d prefer to remain with your current mortgage lender and save time on a new mortgage application, then it may be that a Product Transfer is the right option for you. It’s worth noting that, as you can only access your current lender’s rates, you may not access the most competitive deal available on the market. Your mortgage broker can advise you on the best mortgage product available to you.
Property Portfolio Review
Completing a Property Portfolio Review can be a great way of looking at your current portfolio and finding new ways to increase your returns. Your broker will review your circumstances and discuss ways to boost your property investments for a more efficient portfolio. This process can help you to maximise your cash flow or reduce your overall borrowing across your portfolio depending on your property investment goals.
For a FREE Property Portfolio Review drop us an email here and one of our expert brokers will then be in touch to discuss your options.
In the meantime, if you have any other property finance enquiries you’d like to discuss with our team, call us on 0345 345 6788 or submit an enquiry here.
*Rates as at 30th October 2023 and are subject to change.
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