Buy to Let tracker mortgage rates have been reduced as we hope other lenders will follow suit.
Some good news for investors as BM Solutions have extended their product range for buy to let lending. 1 year trackers now available at 4.35% for 75% LTV borrowing (The overall cost for comparison is 5.1% APR).
We have been waiting for many months for lenders to give investors a break, this move from BM Solutions will certainly help but there is more to do. With the experts pointing out once again this week what we have said since May 2009 (that interest rates are set to stay low in 2010), I would expect BM to shift millions of pounds worth of products in a very short space of time indeed.
Our View:
Here are our reasons once again why most borrowers should opt for a tracker mortgage and how to effectively hedge your bets to ensure you become a shrewd borrower:
Most fixed rate mortgages are still priced a lot higher than their base rate tracker counterparts, in some cases nearly two or three percent higher. Therefore if you go for a fixed deal you are effectively gambling that rates will rise substantially; which would make your fixed deal the viable choice. Below we reveal how you can make a tracker work for you, even if you think a fixed rate is better.
How to save money with a tracker mortgage:
If you can't decide whether to go for a fixed rate or a tracker rate, then budget for the fixed rate but choose a short term tracker with a maximum tie-in of two years. Over the next year put aside the difference in money you benefit from into an ISA savings account. This is the difference between the payments you are making for your chosen tracker mortgage and what you could have been paying for the best fixed rate at the time. By doing this, you are hypothetically paying what you would have done for the fixed rate mortgage but what you are saving by choosing the tracker is going into your ISA savings account.
When the year is up, review your ISA account and the monthly payments. If interest rates have risen you can use the money set aside in your ISA account to offset the rise in payments. If your mortgage payments have stayed the same then you have saved yourself a small fortune to spend how you wish - The best option is to put these savings towards paying off your mortgage!
This method is not always suited to everyone. Have a word with one of our finance specialists and we will be able to help work out the best option for you.
