Lenders hike rates to stem surge in buy-to-let applications

Published 02nd Oct 2008

Lenders raised rates yesterday on buy-to-let deals to stem a rapid surge in demand for competitive rates following the nationalisation of Bradford & Bingley.

Woolwich, owned by Barclays, has increased rates on its buy-to-let deals by up to 0.5 percentage points. It blamed an “unsustainable” rise in the number of applications from landlords seeking to remortgage in the last three days.

Bradford & Bingley was the UK’s biggest buy-to-let lender until it was nationalised by the Government on Monday.

Bank of Ireland has also increased rates on its buy-to-let products by up to 0.85 percentage points, adding £177 to the monthly repayments on a £250,000 mortgage.

In the last two weeks lenders have effectively shut the door to landlords with smaller deposits. Bank of Scotland, owned by HBOS, yesterday was the latest lender to withdrew deals for landlords who have a deposit of less than 25 per cent. It also increased rates on its buy-to-let tracker deals by 0.4 percentage points. The lender cut all fixed rate deals at the beginning of the week.

Lenders have raised interest rates on mortgage deals in the last two weeks after a sharp increase in the cost of wholesale borrowing on the inter-bank money markets. Three-month Libor, which dictates the cost of borrowing to fund mortgage lending, stood at 6.30 per cent today, 130 points above the base rate.

Royal Bank of Scotland has cut a third of its mortgage deals for homeowners, including a two-year fixed-rate deal with an interest rate of 5.54 per cent. Its only remaining two-year fix has a rate of 6.79 per cent.

Coventry Building Society is also set to increase rates on resident and buy-to-let products on Friday.

Source: ' times '

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