BTL landlords go on “buying spree”

BTL landlords go on “buying spree”

Landlords can choose from a “dramatic increase” in the number of buy-to-let mortgage products in the past three months. 

According to Mortgages For Business, there are 550 buy-to-let mortgage products currently on offer.

Its survey found that new purchases comprised a large proportion of lending in the final quarter of 2013, across all residential property types. 

Standard buy-to-let lending saw the largest shift towards new purchases, as 47% of plain vanilla mortgages went towards new buy-to-let property. This is a dramatic increase from the 31% seen at the start of 2013, and even on the 38% seen in the previous quarter.

More complex properties were also increasingly popular with landlords, as Houses in multiple occupation (HMOs) saw similar trends to standard deals.

Larger, multi-unit freehold blocks (MUFBs) also saw the same trend of increasing popularity when compared to both the start of last year and the previous quarter.

Remortgage activity continues to make up the majority of buy-to-let activity, but there has been a significant overall fall during the past six months.

The final quarter saw 53% of standard buy-to-let deals as a remortgage – down from 65% in Q2 – while HMO remortgage activity dropped to 71% from 84% six months previously.

It was similar for MUFBs too, where 69% of loans that were secured were a refinance deal rather than a purchase – down 88% from Q2.

Meanwhile, loan-to-value (LTV) ratios have remained broadly stable across all property types, with only MUFBs seeing higher LTVs in Q4 – up 6% and linked closely to an increase in value among MUFB properties. 

Yields have dropped across all property types, with vanilla buy-to-let yields dropping to 5.9% from 6.3%, while MUFBs fell from 7.6% to 6.8%. 

Yields for HMO property was higher, but also fell to 10.4% in the final quarter, from 11.8% in Q3.   

Semi-commercial property experienced the largest fall – declining to 4.8% from 9.8% the previous quarter, although this is linked to a smaller data set than the other property types.  

“At the end of 2013 landlords could choose between more than 500 mortgage products – the figure today now tops 550,” explained David Whittaker, managing director of Mortgages for Business. “But that choice isn’t just delivering cheaper deals – there are now even more imaginative and flexible financing options out there too – many of which offer some of the best yields.  

“With demand for tenancies as strong as ever, landlords are making use of a more buoyant situation to boost their portfolios. As we move into 2014 capital accumulation is accelerating, and joining solid rental income to make buy to let consistently attractive to investors.”