Check the SVR at the end of a fixed rate mortgage
- 18th December 2008
- Landlord Property News
Buy to let landlords on standard variable rate or tracker mortgages save around 50 per cent of interest charges.
Media reports indicate that around 30 per cent of the buy to let mortgage market are on tracker rates, and that the rate cut sees these landlords generating additional positive cash flow of around £7,000 per annum per London property: a 50 per cent saving on mortgage costs this time last year.
Scenario comparison for £200,000 tracker mortgage illustration of 50 per cent saving :
Base rate as at December 2007 = 5.5 per cent - Mortgage rate on a tracker rates = 7 per cent Interest payments = £14,000
Base rate as at December 2008 = 2 per cent - Mortgage rate on tracker rates = 3.5 per cent Interest payments = £7,000
Stephen Ludlow comments: 'SVR mortgages are by far and away the most attractive to landlords at the moment. With other buy to let mortgages you are paying 3 - 4 per cent above base rate plus a fee of 2.5 per cent and all have LTVs higher than 75 per cent. Compared to this buy to let SVR mortgages are typically 1.99 per cent above base rate and so much more attractive.
Any landlords coming to the end of a fixed rate mortgage should check their loan agreement. Instead of rushing to arrange another fixed rate loan most landlords will be better off letting the loan revert to their existing lenders SVR which will anyway make them a saving.'
Landlords on fixed rate mortgages will be better off letting their loan revert to SVR than arranging another fixed rate.
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