According to a report on the website This is Money, 20% of all buy to let mortgages do not charge landlords an arrangement fee. This is almost double the rate of 2017 when 11% of commercial mortgage deals for landlords did not charge a fee.
Mortgage arrangement fees can be between 1% to 2%, which is added to the total mortgage amount. This is Money gave an example of a 1.99% fee on a £100,000 25 year mortgage. The total fee is £2,275, but with interest added over the 25 years, this could mean that the borrower pays a total of £27,677 in fees.
The main reason for the fee free mortgages is fierce competition. Data from Moneyfacts showed that there are 2,022 buy to let mortgage products available compared to 1,558 a year ago. With more competition, lenders are offering incentives to attract new business. As well as fee free mortgages, some lenders are offering £500 cashback once the mortgage process has been completed. Other lenders are paying valuation and some or all the legal fees.
Landlords have experienced increased costs from higher stamp duty and reductions of tax relief. Many are accessing their business plans and are not ready to invest in buying additional properties. With more mortgage products available, and less demand, lenders are struggling to attract new business and this is why they have resorted to incentives.
A mortgage broker with access to many lenders will find the best deals for landlords.