Lowest ever BTL interest rates released!

“Lowest ever BTL interest rates released!”

It’s a great headline grabber isn’t it?

Well I actually saw this on another property forum and I thought I ought to respond.

Today (Friday 21st June 2013), TMW launched a new range of products including a new 2.49% BTL rate. However, is THIS now the best “lowest ever BTL interest rate”?

Is it true that borrowers really do fall for the headline interest rate only, or do they look for the ‘catches’?

Please allow me to explain ……

Without professional Broker support, many (not all) borrowers are indeed attracted to rates, and we have seen many times that there is however one massive ‘catch’.

The biggest failure of a DIY mortgage arrangement is that the products behind some headline grabbing promotions are sold by a non-advised ‘service’.

There are no Broker fees – but you get what you pay for.

Many times, every day, we carry out specific research for our Clients and here is one example of how the ‘wrong’ “low interest rate” product can cost thousands of pounds more than a higher rate deal.

Here is a table of results – all for a £60,000 BTL interest only mortgage, based on a property value of £120,000 – in ‘Total To Pay’ (TTP) order.  TTP, by the way, is the figure produced when fees such as valuation fees, lenders arrangement fees as well as initial and also reversionary % rates and monthly payments are ALL factored in.

The following table is the top 70 (why 70? – look at no. 65 for the answer!) based on a £60k BTL mortgage in TTP order over a ten year period;

The number 1 lowest rate BTL deal available in today’s market is actually number 65 in the best value charts.

What’s cheaper?  A 2.49% rate deal, a 3.29% deal or even a 4.09% rate deal?

So, using the facts from the table above, if you are attracted to the “Lowest ever BTL interest rate” (2.49% in position 65) and you rush in without advice and proper scrutiny (usually to save a few hundred pounds on Broker Fees!), you could end up paying approximately £8,000 MORE over 10 years for the same £60k deal (no.1 deal at 3.29% and even the number 8 deal at 4.09% is cheaper overall!).

£8,000!?  That’s a lot of rental income and cashflow ‘wasted’, just to save on a Broker Fee.

What do you want? The lowest rate product sold to you by a non-advised entity, or the lowest ‘total cost’ deal properly sourced and secured for you by a professional whole of market Adviser?

To summarise my point above, our repeat Clients (many of whom have been with us for the 20+ years we’ve been in business) instruct us – and recommend us – time and time again because they receive BEST VALUE financial planning advice.  One of our most prolific buying Clients has a property portfolio in the hundreds, and has arranged every single BTL deal he has via my Firm.  He is of course feted by his own bank and many others who want his business, however he has stayed loyal to us (and continually recommends us) as our service (albeit fee charging) helps him to CUT costs, secure best TTP value arrangements, and importantly we ensure the necessary flexibility and ‘back office’ whole of market service that assists his continued business management and growth.

This is NOT an advert for me and my Firm (it could be misconstrued that way, I agree), but actually it IS a promotion for all borrowers to always instruct whole of market advice, however for those who buy ‘best ever lowest rate’ deals without full and diligent scrutiny of the whole TTP calculation, as well as not properly understanding criteria and forgetting to look to flexibility for changes for potential future requirements too, then as the saying goes .. caveat emptor.

Contact Howard Reuben

Mortgages, Commercial and Bridging Finance, Life Insurance, Wills, Trusts and LPA's

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