Am I paying too much for my buy-to-let mortgage?
Q&A: Dominic Coyle
Mortgage rates on investment properties are never as competitive as those available to owner-occupiers. Photograph: Simon Dawson/Bloomberg
I have an investment property with an outstanding mortgage of €100,000. The property is worth about €250,000. I am currently paying the mortgage at a fixed interest rate of just over 4 per cent.
For an investment property, is this a normal price to pay in the current climate, or should I be looking to swap mortgage providers?
I have heard that Avant Money is offering interest rates of 2 per cent. Is this the case for investment mortgages? I am concerned about costly legal fees if I was to swap, and the amount of time it would take as well.
Ms C.D., email
Mortgage rates on investment properties are never as competitive as those available to owner-occupiers. At least, that has been the position up to now.
As you say, Spanish player Bankinter has now entered the market but has to date been very general in any of its comments about the business it is looking to attract through its network of brokers.
The presumption had always been that they are likely to cherry-pick the market, focusing on low loan-to-value business among people in more secure employment.
And an early indicator was that, while some rival lenders have already adjusted their owner-occupier rates to take account of the new competition, there does not seem to have been any such moves on the buy-to-let, or investment property, side of the business.
And when I checked, I was assured that this is not an option for you. Avant Money will not apparently be offering loans for the buy-to-let market – not even for apparently attractive propositions like yourself with a mortgage that is just 40 per cent of the current property value.
It was always unlikely that you would be able to avail of any 2 per cent rate. Lenders tend to advertise their very lowest rates but these are often on offer only to a very select market – and all lenders consider owner-occupiers to be more attractive than buy-to-let, if only because people at risk of losing their homes tend to be more focuesd than those who merely have a business investment at risk.
With Avant not an option, the more fundamental element of your question is whether you are paying over the odds for your mortgage.
You don’t say who you are currently with but, at 4 per cent, your rate seems very competitive with what is available out there.
In fact, only ICS, owned by Dilosk, can do any better at 3.75 per cent for people looking to borrow 60 per cent or less of the value of the property. And that is a variable rate which can go up at any time depending on market forces, or indeed the need of the lender’s bottom line margin.
In terms of fixed rates, Ulster’s 4.5 per cent is the lowest but that is only for two years – and only the most optimistic banks would see European rates rising by then.
Permanent TSB have a five-year fix at 4.85 per cent, just shy of the 4.9 per cent available from Bank of Ireland. AIB don’t seem interested in this market at all, with its five-year fix pitched at 5.5 per cent.
All told, your current rate is certainly not uncompetitive.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or email firstname.lastname@example.org. This column is a reader service and is not intended to replace professional advice. No personal correspondence will be entered into.