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Low mortgage rates wont last forever.
Thu 8th Oct 09 - 13:58
Buy to let tracker rates have dropped for the seventh month on the trot according to Legal & Generals quarterly report the "Mortgage Analysis Purchase Index.
Thirty per cent of buy-to-let mortgages were variable rate mortgages, which was up 13% in Q2. Seventeen percent of residential borrowers chose a variable rate, against 12% in Q2. Average two year fixed rates fell to 4.99% from 5.46%, but average three to five year fixed rates are all up significantly.
Average residential LTV's was 59%, whereas buy-to-let was 66%. Jonathan Smith, Chief Broker at northmortgages.co.uk said: "There was a clear trend towards tracker and variable rates, but the movement is less pronounced in the residential borrowers. The proportion of buy to let mortgages on a variable rate organized by North Mortgages has doubled in three months, from 13% to 30%. In Q1 last year, for example, over 60% of buy-to-let mortgages were variable rate.
"Average two-year rates fell from 5.46% to 4.99%, but three and five year rates are up 92 base points and 103 base points respectively. This shows the strength of belief in the money markets, that interest rates will rise over the next few years. Borrowers who have recently taken tracker rates will factor this in.
"To some extent, the environment of low interest rates created the illusion that the economy is" back to normal "and that the recession is almost over. In fact, the base rate, at this current level means that the economy is far from normal and things will not go on like this forever."
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Source: North Mortgages Ltd - 8th October, 2009
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