New long-term fixes available for landlords

Landlords who are concerned about higher mortgage costs if interest rates rise have a wider range of fixed rate options to choose from following the launch of a new range of 10-year fixes. The Mortgage Works, the specialist buy-to-let arm of Nationwide Building Society, has introduced a market-leading 10-year fixed rate deal for landlords looking to borrow up to 65% of the property value. The deal has a £1,995 fee but comes with a free standard valuation and £250 cashback. Early repayment charges apply throughout the 10-year fixed rate period. Alternatively, landlords have the choice of a slightly higher 10-year fixed rate deal which only has early repayment penalties for the first five years. This deal again comes with a £1,995 fee, free standard valuation and £250 cashback.Lower stress ratesThe Mortgage Works has also reduced its stress rates on selected products. These are the rates that lenders apply during the mortgage application process to check that you’d still be able to afford to pay your mortgage should interest rates go up. For example, The Mortgage Works used to apply a stress rate of 4.99% for five year fixed rate deals to make sure landlords could withstand higher payments, but this is being reduced to 4.50% for those borrowing up to 75% of the property value. The stress rates have also been reduced for borrowers taking a 10-year fixed rate mortgage, and those remortgaging on a like-for-like basis and borrowing between 65% and 75% of the property value.Why are stress rates being reduced?It’s a common approach for lenders to apply lower stress rates on longer term fixed rates, as there are no fluctuations during that time, and a higher stress test is therefore not necessary. From a landlord’s point of view this offers an increased level of flexibility, but investors should make sure that this type of deal is right for them before going ahead.