The number of available buy to let mortgage products has leapt in Q3, according to the latest Complex Buy to Let Index from specialist brokers Mortgages for Business.
Landlords in the UK now have the widest choice of mortgage options on record, almost 1,000 in the third quarter of 2015, a rise of 11% since the previous quarter.
On an annual basis this represents an increase of 35% in buy to let mortgage products, according to the latest index from specialist brokers Mortgages for Business.
The report also shows that standard ‘vanilla’ buy to let listings already offer the lowest gross yield to landlords, but this has now dropped 0.8% in the space of three months, to the psychologically important level of 5%. On an annual basis, yields on vanilla listings have fallen further by 0.9% since the third quarter of 2014.
Similarly, between the second and third quarters of 2015, the yield on a multi-unit freehold blocks (MUFBs) fell from 7.1% to 6.1%. Compared to a year ago, when the average MUFB yield was 8.6%, yields for such listings have seen a 2.5% fall. However, at 6.1%, the absolute level remains considerably higher than for ‘vanilla’ listings.
Houses in multiple occupation (or HMOs) have seen yields perform comparably well. Between the second and third quarters HMO yields fell by only 0.1% to 9%.
As well as more modest yields overall, this means the spread between the lowest yielding listing type (vanilla) and the highest yielding (HMOs) has widened to 4%.
‘The number of new mortgages coming onto the market has rocketed in recent months. There is huge interest in mortgages suitable for limited companies as landlords take advice from their accountants,’ said David Whittaker managing director of Mortgages for Business.
‘Meanwhile, as rents fail to keep pace with racing listing prices, yields are continuing to plateau. Returns on vanilla buy to let have now fallen to the 5% mark. Landlords with reasonable borrowing costs and a strong portfolio of these sorts of listings will still be making a solid income from such investments but this changes the case for those considering new purchases. With average yields on HMOs still nearer 10%, more complex listing types are likely to attract a growing portion of new investment,’ he explained.
The research also shows that remortgaging has outperformed new purchase loans for the fourth quarter running. In the third quarter some 66% of new vanilla buy to let loans were for remortgaging, compared to 34% for new listing purchases, a 4% increase in favour of remortgaging since the previous quarter.
Similarly, for MUFB listings, remortgaging made up 89% of new mortgages in the third quarter of 2015, compared to 82% remortgaging in the second quarter and just 67% in the third quarter of 2014.
In the second quarter new purchases made up just one in 10 mortgages for homes in multiple occupation, some 10%, however, the third quarter has seen the proportion revert to the recent trend.
‘There is a change of mood from landlords. Recent unfriendly noises from the Government and Bank of England have contributed but mostly this represents a natural cooling in the buy to let industry after an exceptionally strong first half of 2015,’ Whittaker pointed out.
‘Consolidation is the order of the day. Landlords are taking full advantage of record low borrowing rates while this lasts. The fact that landlords are choosing in vastly larger numbers to remortgage rental listing rather than purchase shows they are looking to get a competitive fixed rate mortgage,’ he added.
BOOKMARK THIS PAGE (What is this?)
Source: Property News Spain