Buy to Let Mortgages, the SVR and Follow On Mortgage Rates
Landlords (or indeed anyone buying a property) face ever rising costs to buy and sell property.
On the buying side, stamp duty and the now ubiquitous “mortgage arrangement fee” are both much higher than in days gone by and local councils also charge more for searches. On the selling side, estate agency fees continue to rise. On both buying and selling, solicitors’ conveyancing fees have increased a lot too.
With these rising costs in mind – and in order to “amortise” them over time – most house buyers now move house less often than in the past. And, for the same reasons, most serious investors in buy to let (as opposed to developers) are “in it for the long term” too and – mindful of entry and exit costs – tend not to buy and sell houses too often.
Also, even if you are not planning to sell a property, the rising cost of the mortgage arrangement fee also makes it more costly to switch mortgages.
Reversionary Mortgage Rate
So, as this is the case, I think there is a case for press articles on mortgage rates to tell readers to at least look at what the “follow on” or “reversionary” mortgage rate will be at the end of the discounted or fixed rate period – because they are not all the same.
Often the short term discounted rate looks great, but the follow on rate at the end of the discounted rate period is very high.
What’s the Follow On Rate?
The trouble is most pieces in the press fail to mention the follow on rate at all.
Now I appreciate that all journalists are confined by a word limit imposed by the editor, but I think all articles on mortgage rates should at least mention that landlords (or indeed any house buyer) should check what the follow on reversionary rate is or, if the follow on rate is the SVR, to enquire if the Standard Variable Rate (SVR) is actually linked to anything specific.
Is the SVR fixed amount at some set amount above BOE base rate, is it linked to LIBOR or is it the worst of all scenarios (for the borrower) whatever the lender feels like charging at any point in time?
Naturally, where the follow on rate is very high, this fact tends to get left out of the press releases the mortgage companies put out to promote their mortgage rates.
Professional landlords like me look always look at the follow on rate.
As an example, I have two lifetime tracker mortgages (one pegged at 0.69% and the other at 0.89% over Bank of England Base Rate.) I took out both in the good old days, before the credit crunch hit in 2008.
With these mortgage loans, I had the foresight, at the time to look beyond what was a mediocre introductory rate to see that the long term follow on rate was actually a winner.
The lender is a high street bank – their loss, my gain!
MORE ABOUT LETTINGFOCUS AND WHAT WE DO
LettingFocus.com is the home of Private Rented Sector Advice and consultancy.
Services to Businesses and the Public Sector
We are consultants to a range of organisations including banks, building societies, local authorities, social housing providers, institutional investors and insurers. We help them develop and improve their services and products for private landlords.
We also write for property websites, speak at property events and we are regularly quoted by the media.
Services for Private Landlords
We also help landlords and property investors by showing how to make money in the private rented sector using ways which are fair to tenants and which involve minimal risk to the investor.
AT OUR WEBSITE LETTINGFOCUS.COM:
HOME PAGE OF THIS BLOG click here: Blog
To read blog posts on related posts use the tags and categories at the bottom of each post (after the list of links), or over to the top right. Here, you can click on “Select Categories” and use the pull down menu to read all the posts on any Category that interests you.
THE HOME PAGE OF OUR MAIN SITE
Click here: http://www.LettingFocus.com
For general info on our CONSULTING SERVICES and also to find a small sample of links to where our comments have been featured in the National Press please click: Consultancy and Seminars
For ONE TO ONE PRIVATE CONSULTANCY FOR PRIVATE LANDLORDS click here: Property Advice
TO READ CLIENT TESTIMONIALS – from both organisations and private landlords click here: Testimonials
BUY “SUCCESSFUL PROPERTY LETTING”
Our book is the highest selling property book in the UK. Click here to Find Out More and Buy it at Amazon. If you are from an organisation and would like to bulk buy at least 50 books please ask us for special rates.
TO JOIN OUR FREE NEWSLETTER which goes to 3,000 people just send an email to [email protected] – We do not spam or sell our mailing list to advertisers. Please put us on your “white list” to ensure you receive our emails.
PRODUCTS FOR LANDLORDS: Landlords Resources
GET THE RSS FEED FOR THIS BLOG Click Here
Copyright of Blog: David Lawrenson 2011. Please link to us here or quote us. We actively pursue copyright infringements. The blog is updated once a week, usually on a Monday or Tuesday (or more frequently when “hot” news items come up.)
TWITTER PAGE For my thoughts on property, personal finance, plus as well as other random things from sport, to 80s and 90s Indy Music, to tsunamis andpolitics please see our Twitter page.
LINK TO THIS BLOG OR TO OUR WEBSITE