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  • Property-a-holics

    Bank base rate and LIBOR trackers question

     

    Why are so few buy to let mortgage lenders offering the transparency of bank base rate and LIBOR tracker mortgages?

     

    The few lenders that are offering tracker mortgage products are doing so for a very short period of time, after which the mortgage rate payable reverts to a rate they insist is set by market forces. They call these rates SVR or Standard Variable Rates but I've always viewed these with suspicion.

     

    If the market rate is 2, 3 or 4% over bank base rate or LIBOR why are lenders not sticking to that pricing model beyond the first few years? Could it be so that they can decide to whack the rate up if they choose to exit the buy to let market?

     

    At a time when more buy to let lenders are entering the market and allegedly 'competing for new business' why aren't they offering landlords the transparency we desire?

     

    Has this lack of transparency in mortgage product pricing put anybody else off taking new mortgages or am I alone in my mistrust of SVR's?

     

    I look forward to reading the Tribes views.

     Regards

    Mark Alexander

    Founder of Property118.comLatest headlines below:

    Property118.com

     

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    Regards


    Mark Alexander - Property118.com
    Twitter: @iAmALandlord

    What has concerned me the most is the idea of 4/5% over base, fine right now but what about when base returns to 5% ish.

    I appreciate that this is now looking a long way off.

    Richard

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    I fully concur with that view point Richard but at least if the basis of calculating future interest rates was transparent a commercial decision could be taken. It's the lack of transparency with lenders SVR arrangements which concerns me most. What's to stop them deciding that SVR for buy to let mortgages is 10% in two years time, even if base rates stay as they are?

    The argument of "market forces" determining pricing is all well and good whilst lenders want to compete for business. However, if they decide buy to let isn't for them any more ............ ??? Richard Hedges said:

    What has concerned me the most is the idea of 4/5% over base, fine right now but what about when base returns to 5% ish.

    I appreciate that this is now looking a long way off.

    Richard


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    Regards


    Mark Alexander - Property118.com
    Twitter: @iAmALandlord

    I am having fun with a lender who has decided B2L is not for themSmile

    However has the SVR changed from that of 5 years ago? BTW yes that is a question not a statement.

    Richard

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    It is making me choose to buy properties with a high yield.  If I can make £600 pcm net income (on a £60k outstanding mortgage) I am not that worried by a rate rise of 3 percentage points above current mortgage rates (eg, going up towards 9%).  

    If I was making £50 a month income I'd be concerned.

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    Professional student and residential lettings in Liverpool.
    http://www.topproperty-services.com
    Twitter: @ToppropertyUK

    Yes my views too Simon in a nutshell......  We`ve had an excellent run so  when they do go up I cant complain. And if the healthy  cash flow is there on a relatively low loan amount the figures are not that frightening.  

      I do think the SVR is being used as a weapon though but again i cant blame them. Many used to be tracked to BBR but they got wise to that and SVR was introduced more and more to give them more flexibility and control.  If I was in their shoes I would do exactly the same to maximise their income. Its a game of chess.  When the rates go up it will be interesting to see who will raise their SVR`s in line with the BBR or will the margins  reduce to retain business. It depends whether they want to remain competative in the industry or be like some who have shown their hand and make no pretence that they want out of the market alltogether.

     There was a lot of ignorance I believe in the early days about the SVR ( me included) . I used to look at the initial headline rate when I took out 5yr fixes but paid not so much  attention to whether it reverted to BBR + x% or onto their SVR . My IFA drew my attention to it but 5 yrs down the road is a long way off so I was more yeah yeah yeah  paying lip service to it whilst I concentrated on the next deal.   Simon Topple said:

    It is making me choose to buy properties with a high yield.  If I can make £600 pcm net income (on a £60k outstanding mortgage) I am not that worried by a rate rise of 3 percentage points above current mortgage rates (eg, going up towards 9%).  

    If I was making £50 a month income I'd be concerned.


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    Jonathan Clarke. http://www.buytoletmk.com

    Hi Mark, I totally agree with you. This lack fo transparency make borrowing riskier than the market moviment. SVR lost it meaning, lender can manouvre as a way of repositioning from losses or satisfying market expectation at the expense of existing borrowers.

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    It moved an even longer way off yesterday as some predictions for the first rise moved out to Dec 2016 - Jan 2017 - Who knows maybe they will take the rate down to zero next week

    Richard Hedges said:

    What has concerned me the most is the idea of 4/5% over base, fine right now but what about when base returns to 5% ish.

    I appreciate that this is now looking a long way off.

    Richard


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    Charlie Burnett
    Holburn Energy Services