Flat fees for buy-to-let mortgages are now lower than they have been at any point over the past year, according the latest edition of the Buy-to-let Mortgage Costs Index from Mortgages for Business.
The average flat fee among buy-to-let mortgage products fell by more than 5% in Q2, down to £1,370 from £1,446 in Q1. Landlords favouring these fee structures stand to save an average of £76 in fees on every mortgage they take.
However, percentage based fees are becoming increasingly common with lenders, likely as a way to keep interest rates low while still allowing profits to scale with larger loans. Percentage based fees now apply to 48% of buy-to-let mortgage products, having overtaken flat fees on product availability at the start of the year. These products have increased in number in every quarter since Q2 2016.
Steve Olejnik, COO of Mortgages for Business, said: “With interest rates still at exceptional lows, it’s all the more important to make sure you look at any additional charges when taking a buy-to-let mortgage. It is therefore promising to see a reduction in the average flat fee charged for mortgage products.”
With percentage fees becoming more common and no change in the prevalence of flat fees, it is not surprising there has been a reduction in the availability of fee-free options. Just 11% of buy-to-let mortgage products carried no arrangement fees in Q2, down from 15% in Q1.