However, percentage based fees are becoming increasingly common with lenders, likely as a way to keep interest rates low while still allowing profits to scale with larger loans. Percentage based fees now apply to 48% of buy-to-let mortgage products, having overtaken flat fees on product availability at the start of the year. These products have increased in number in every quarter since Q2 2016.
As percentage fees become more common, the market has also seen a reduction in the availability of fee-free options. Just 11% of buy-to-let mortgage products carried no arrangement fees in Q2, down from 15% in Q1.
Steve Olejnik, COO of Mortgages for Business, said: “With interest rates still at exceptional lows, it’s all the more important to make sure you look at any additional charges when taking a buy-to-let mortgage. It is therefore promising to see a reduction in the average flat fee charged for mortgage products."