Banks tap huge margin on buy-to-lets

By Eamon Quinn

A huge gap between the low-interest rates that UK banks charge landlords for their buy-to-let (BTL) loans and the elevated levels charged in Ireland has widened to record levels, as Irish lenders tap a huge premium on their loans.

Citing figures from price-comparison website,, BTL fixed-rates in the UK have returned to record lows, said John Cronin, UK banking expert at Goodbody. However, despite the huge margins apparently available in Ireland, he believes the chances of a UK lender, with a focus on landlords, entering the Irish market are slender.

Britain’s average buy-to-let, five-year fixed rate fell to 3.43% this month, returning to the record lows of October, 2017, as a wide range of lenders in Britain, who cater for landlords, vie to attract borrowers re-mortgaging from two-year fixed rates, after the UK increased stamp duty on landlord properties two years ago.

Mr Cronin said that the five-year fixed rate was a popular choice for British landlords, because the UK stress-tests utilised by UK banks do not apply. That, in turn, has led to banks increasing the number of five-year products.

Michael Dowling, managing director of Michael Dowling Mortgage and Financial Services, said, in terms of buy-to-let interest rates, that “Ireland is the opposite to the UK”.

The best interest rates available for BTL mortgages in Ireland include a variable rate, at a 50% loan-to-value of 4.4%, and a 50% to 70% loan-to-value rate of 4.75%.

The three-year, fixed rate for BTL borrowers in Ireland is pegged at 4.95%, while the five-year fixed rate stands at 5.1%, Mr Dowling said.

“BTL mortgages account for less than 4% of the mortgage market in Ireland and banks are achieving a significant premium on the interest rates charged,” he added.

Mr Cronin, at Goodbody, said it was, however, unlikely that UK lenders would move into the Irish market, implying that BTL interest rates would remain at elevated levels.

In Britain, lending to landlords is hotly competed for by the main banks and by a range of smaller BTL lenders, including OneSavings Bank, Charter Court Financial Services, Aldermore Banking, and Together.

“There is no sign” that a UK lender is looking to enter the BTL market here, because of the “emotional” experience of the banking losses made in Ireland in the past, and the likely compression of margin that would be triggered, as existing banks responded with lower interest rates, Mr Cronin said.

He said: “I think it is a possibility, but a low probability”, that a UK lender would enter the buy-to-let market here.

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