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BTL investors seek larger loans as they look to diversify

A majority of buy-to-let landlords are applying for larger loans as market conditions encourage borrowers to buy more expensive properties and diversify their portfolios.

According to buy-to-let lender Keystone Property Finance, three in five of its customers applied for a mortgage in its larger loans range, which offers loan sizes between £250,000 and £1m, since December.

The lender said the popularity of larger loans could be due to landlords being able to afford more expensive properties as a result of the stamp duty holiday.

Elise Coole, managing director of Keystone Property Finance, said: “Our data shows that landlords remain confident about the buy-to-let market, with the majority of customers looking to secure a larger loan to purchase their property.

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“Undoubtedly, the [stamp duty holiday] has played an important part in this and has presented landlords with an excellent opportunity to bolster their portfolios and invest in higher value properties.”

Chris Sykes, associate director and mortgage consultant at Private Finance, said with possible rent arrears during the pandemic, this had partly encouraged landlords to consider diversifying their portfolios, thus requiring larger loans.

A November survey from Citizens Advice found half a million private renters were behind on their rent. MPs have called on the government to support tenants to repay rent arrears caused by the pandemic, including funds for landlords to help them receive income and avoid evictions.

Sykes said: “We have many portfolio landlords who traditionally only did single let family homes for example, who now are looking into houses in multiple occupation, multi-unit freehold blocks, holiday lets, etc.

“Many are even going further afield than that and are looking into commercial or semi-commercial property or development opportunities for higher yields, perhaps more hands-on investments but the profits often are considerably higher and [often require] larger loans to get things done.”

Data from Hamptons shows 15 per cent of all sales agreed in November were to landlords, the highest figure for four years, with investors “rushing to complete” their purchases before the original stamp duty holiday March deadline, according to the estate and letting agent.

Matthew Fleming-Duffy, director at Cherry Mortgage & Finance, said his firm had seen over 60 per cent of its business come from landlords between December and mid-March.

Likewise Aaron Strutt, product and communications director at Trinity Financial, noted demand from borrowers purchasing expensive buy-to-let properties due to cheap rates.

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Strutt said: “We are getting more calls from borrowers who are keen to purchase an investment property.

“There are a lot of landlords with £250,000-plus mortgages keen to remortgage and get the best possible deal. There is also demand from borrowers purchasing expensive buy-to-lets because of the cheap rates.”

The figures from Keystone Property Finance also found that three in five applications (62 per cent) for its larger loan products were from landlords registered as a limited company.

Mark Harris, chief executive at SPF Private Clients, said his firm had seen a marked interest in setting up a buy-to-let limited company.

Harris said: “We have seen significant interest from landlord clients with regard to switching to a limited company and lenders are recognising this with a wider range of products at competitive pricing.”

By Chloe Cheung

Source: FT Adviser

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Most profitable locations for buy-to-let landlords revealed

Brighton, Bangor, Portsmouth and Leeds are the top places for buy-to-let landlords, research from CIA Landlords has revealed.

Ranked at the bottom of the table is St Albans, with the poorest prospects for landlords this year, with some potentially making a loss of more than £700 a month.

Only six locations in London remain profitable, with the majority of boroughs losing money.

The research also reveals that profitability in the Capital has nearly halved since January 2020, amid a major exodus during the pandemic.

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Brighton remains the most profitable place to be a landlord for the second year running, with landlords in the coastal town making a monthly profit of around £570.

The findings, which took into account rental fees charged to tenants and landlord costs placed Bangor in second place (£500.53), Portsmouth in third place (£479.27), Leeds in fourth place (£477.60) and Lancaster in fifth (£474.54).

Bristol, Coventry, Manchester, Nottingham and Salford rounded out the top ten.

Stuart Williams (pictured), director of Thirlmere Deacon, said: “Over the last few months, some landlords have seen their profits dented due to the Chancellors’ tax measures that are only now taking effect.

“Undoubtedly, it is becoming more difficult for amateur investors to make a profit in the buy-to-let market due to legislation changes and financial pressures, there is still a lot of money to be made if landlords and investors make the right investment decisions.

“If investors can purchase cheaper properties with higher yields, they will have the opportunity to protect and boost their profits in the longer term. For example, an average residential property in London is around £500k with rental yields of circa 2%, while a flat in a good area of Manchester could cost half the price and generate 6-7% rental yields on top of 4-5% annual capital appreciation.

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“Landlords should review their existing portfolio to see if they can boost rental income and protect profits, by attracting a different market. Landlords will often find the best returns in urban areas, with a concentration of students and young professionals.

“It is also worth landlords considering setting up a limited company and using this structure to hold their properties.

“This will enable them to continue deducting mortgage interest when they are calculating profits. Landlords can also benefit from just 20% corporation tax, instead of income tax of up to 45%.

“Landlords need to do a serious portfolio review and work out how the tax changes affect them and what options there are to save, or make more money. For example, remortgaging to get a better deal or renovating some old stock – these costs will be tax-deductible.

“Alternatively, landlords could consider selling some properties or increasing the rent.”

By Ryan Fowler

Source: Mortgage Introducer

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Holiday let deals surge – can supply keep up with demand?

A jump in the sale of homes for holiday let purposes has corresponded with an increase in mortgage options for borrowers keen to cash on this flourishing areas of the buy-to-let market.

This is according to the latest data from Moneyfacts.co.uk which has revealed a ‘notable’ rise in the number of buy-to-let options for holiday lets over the past six months.

The figures are released as prospects of Brits being able to travel overseas for holidays this year continued to look uncertain.

Moneyfacts revealed today mortgage options for borrowers looking at holiday lets had grown by 45% in the past six months and product availability was double that in August 2020.

The analysis drew on research from Hodge Bank, which showed, over the past six months, there had been a surge in sales of holiday homes near the coast.

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Moneyfacts said the abundance of holiday let products had returned to levels seen a year ago. However, supply of housing overall meant the market was failing to keep up with demand.

According to Rightmove, new listings of properties overall were not satisfying record buyer demand, with available stock down nationally by 25% year-on-year.

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Consumers may have taken some time to reflect on staycations in light of uncertainties surrounding international travel and how a holiday let could be a worthy investment.

“Lenders have moved over the past six months to cater to the demand for those looking to invest in property, as there has been a rise in holiday let deals of 45%, and product availability has in fact doubled since August 2020.”

Buy-to-let mortgage market analysis 
BTL options available(fixed and variable)Mar-20Aug-20Oct-20Now
Available to holiday let16274103149
Lenders offering holiday let deals20141721
Average fixed rate available to holiday let3.37%3.53%3.79%3.95%
Source: Moneyfacts.co.uk

Trends

According to Moneyfacts it is the building societies which seem more likely to provide the deals to meet the growing demand – whether for someone who uses their own home or takes out a new loan to fund the holiday let investment.

Springall cited research from Hodge Bank, which revealed of those purchasing a holiday home, 65% took out a new holiday let specific mortgage and 35% remortgaged their existing home to finance their holiday home.

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Supply and demand

Springall added: “Supply and demand may well be a key issue in 2021 for investors who feel staycations are here to stay awhile yet, and indeed according to Rightmove, national new listings stock is down 25% year-on-year.

“Any lack of holiday home opportunities will come as frustrating news for investors considering the return of holiday let deals on to the market, especially as sales figures nationally are rising and some consumers have more disposable income from lockdown and are therefore ready to invest.

“Data from PropertyMark cited that one in nine properties nationally sell more than the asking price, with recent figures hitting a five-year high.

“Clearly, for any opportunities that prospective borrowers are contemplating, it is wise they approach an independent qualified financial adviser to go through the deals currently available and to get some valuable insight into the workings of a holiday let, including tax benefits, rules regarding residency periods, rental income desirability and requirements, and other potential expenses outside of utility bills.”

Source: Mortgage Finance Gazette

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BTL landlords reveal market confidence by opting for larger loans

Data from Keystone Property Finance has revealed that mortgage products designed to offer exclusive rates for higher loan amounts are the most popular product among BTL landlords, with more than half (58%) of Keystone clients applying for their larger loans range since December 2020.

The specialist BTL lender’s larger loan range caters for loan sizes of £250,000 – £1m and offers rates from 3.09%.

The rise in popularity for larger loans could be attributed to landlords looking to take advantage of the stamp duty incentive and being able to afford more expensive properties as a result of the tax saving. Data shows that landlords made up 15% of all sales agreed in November 2020, the highest level for four years, as a result of the stamp duty incentive.

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Keystone’s figures also signal a growing confidence in the market, as landlords continue to take out larger mortgages in expectation of a continued uptick in future property prices and of positive rental yields post-pandemic.

The data also reveals differences in the types of landlords applying for the specialist lender’s larger loan products, with nearly two-thirds (62%) of applications coming from limited companies compared to 38% of applications from individual landlords.

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Elise Coole, managing director of Keystone Property Finance, said: “Our data shows that landlords remain confident about the BTL market, with the majority of customers looking to secure a larger loan to purchase their property.

“Undoubtedly, the SDLT incentive has played an important part in this and has presented landlords with an excellent opportunity to bolster their portfolios and invest in higher value properties.

“The private rental market plays a critical role for millions of people and at Keystone Property Finance, we’re committed to supporting our brokers and their landlord clients by offering a wide range of innovative solutions.

Source: Property Wire

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Buy-to-let product choice reaches one-year high, the analysis has revealed

Product choice in the buy-to-let market is broadening but rates are also on the rise, the latest analysis from Moneyfacts.co.uk has revealed.

Figures released today show availability of products is at a one-year high, having risen for the fifth consecutive month to reach 2,333.

Moneyfacts said the sector had recovered to 81% of pre-pandemic levels (compared to 68% recovery in the residential sector) and now offered the highest number of products seen since last March, providing landlords with a greater level of choice.

Yet, at the same time, the average two-year fixed rate was 0.28% higher year-on-year – at 3.05% was the highest recorded since June 2019 (also 3.05%).

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The five-year equivalent at 3.41% increased 0.17% compared to a year ago and was currently the highest since September of 2019, when it reached 3.44%.

Month-on-month, the only borrowing tiers where rates had fallen since February were at 60% loan-to-value (LTV).

Moneyfacts also revealed how the proportion of the fixed rate buy-to-let sector which was offering fee-free deals or incentives – such as free valuations or free legal fees – had also reduced year-on-year.

This, Moneyfacts, said, indicated landlords may have to search a little harder for deals with the right incentive package for them.

Meanwhile, the proportion of the market where cashback was available has risen to 25% – a 4% improvement on last year.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “There is no doubt that the impact of the pandemic has been polarising, with the buy-to-let sector not escaping from this trend.

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“There may therefore be landlords whose focus will be on cutting costs and increasing margins where possible, perhaps by refinancing their existing buy-to-let mortgages.

“Equally, there may be some who are now in the fortunate position of being able to consider investing in a rental property for the first time.”

Williams also explained how the only LTV tier where average fixed rates did not increase this month was at 60% LTV, where both the two and five-year average fixed rates fell by 0.38% and 0.27% respectively.

She added: “It is important to note though that these are averages, and therefore while representative of the market as a whole, there are some very competitively priced products available, with some – depending on LTV and criteria – available at below 2%.

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“Therefore, those who are hoping to refinance or take on a new deal would do well to shop around.”

Buy-to-let mortgage market analysis (Source: Moneyfacts)
Mar-20Feb-21Mar-21
BTL product count – fixed and variable rates2,8972,1002,333
BTL two-year fixed – all LTVs2.77%2.97%3.05%
BTL two-year fixed – 80% LTV3.56%3.97%4.14%
BTL two-year fixed – 60% LTV1.89%2.52%2.14%
BTL five-year fixed – all LTVs3.24%3.32%3.41%
BTL five-year fixed – 80% LTV3.98%4.11%4.29%
BTL five-year fixed – 60% LTV2.31%2.79%2.52%
Buy-to-let fixed mortgage market analysis (Source: Moneyfacts)
Mar-20Feb-21Mar-21
Deals with no product fee475 (19%)254 (14%)301 (15%)
Deals with free/refunded legal fees840 (34%)614 (34%)614 (30%)
Deals with a free/refunded valuation1352 (55%)774 (43%)789 (39%)
Deals with cashback531 (21%)307 (17%)503 (25%)
Data shown is as at first working day of month, unless otherwise stated. The % shown is the proportion of deals out of the fixed mortgage market. Source: Moneyfacts.co.uk

Source: Mortgage Finance Gazette

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Paragon Bank launches 80% LTV BTL range for energy efficient properties

Paragon Bank has launched a range of 80% LTV buy-to-let mortgages, including a market-leading rate for Houses in Multiple Occupation (HMO), specifically for properties with an energy performance rating of A to C.

The new range aims to encourage landlords to invest in energy efficient properties and increase the proportion of A-C rated properties in the private rented sector (PRS).

The number of properties in the PRS with an energy rating of between A-C has increased by 272% over the past decade to 1.8 million, but approximately six out of 10 homes in the sector are still at grades D or below.

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The five-year fixed rates start from 3.99% for purchase and remortgage and include free valuations, no product fees and £350 cashback. They are available for portfolio landlords on single self-contained properties and HMO.

Richard Rowntree, managing director of Mortgages at Paragon Bank, said: “Landlords have made great strides in adding more energy efficient homes to the PRS – or upgrading properties to C or above standard – over the past decade. However, more needs to be done as the Government moves towards its net zero carbon target by 2050 and landlords have a key role to play in that.

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“Our new range of products at 80% LTV for homes with an energy rating of C or above will be an incentive for landlords to add energy efficient homes to the sector, benefitting tenants through lower energy bills and the environment through reduced consumption.”

Under Government proposals, homes in the PRS will need a minimum EPC rating of C for new tenancies by 2025 and all homes in the sector will require this rating by 2028.

Richard Rowntree concluded: “If landlords are to improve the energy efficiency of PRS stock, they need the finance to enable them to do so. Making sure there are attractive options to add new stock, whilst recognising the efforts to upgrade existing properties, is an important element of this.”

Source: Property Wire

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Majority of landlords waiting for lockdown measures to ease before investing

Over half (59.8%) of BTL landlords are waiting for lockdown measures to ease before investing in properties, according to the National Landlord Index by Accommodation.co.uk.

The research highlights that UK landlords still see the rental market as a safe place to invest especially as the stock market has been so volatile during the pandemic.

This desire from landlords to expand their property portfolios in 2021 is reflected in the demand for buy-to-let mortgages with the index revealing that nearly two-fifths (37.8%) of landlords are planning to apply for one this year.

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As the UK starts to see the benefits the vaccination has on the economy, Accommodation.co.uk says it is “clear” that landlords are optimistic that this recovery will be reflected in house prices long-term.

Aaron Short, founder and chief executive at Accommodation.co.uk, said: “We are always listening to our landlords and tenants to understand the needs of the market and this is why the National Landlord Index remains so important.

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“Understanding how BTL landlords are being impacted by lockdown measures and what their plans are post-pandemic help us to understand the future lettings market. It is great to see landlords looking to expand portfolios and generally positive about the future and this certainly mirrors the growth we have seen at Accommodation.co.uk.

“We have been at the forefront of updating this archaic industry and we believe our award-winning model offers tenants and landlords the best solution in the current market.”

Source: Property Wire

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Growing interest from new investors in BTL market

Interest from new investors in the buy-to-let market is growing, according to Knowledge Bank’s latest tracker results.

The analysis of brokers’ searches in February found intermediaries are working with potential new landlords, and the furlough scheme is still of interest in the residential market.

For the tenth month in a row, buy-to-let brokers reported interest from ‘first-time landlords’, with the criteria reaching the top five, and in February it was the most-searched term by brokers.

Knowledge Bank believes this demonstrates the interest in the rental market from investors, who would normally look to deal in stocks and shares, but are now shifting attention to buy-to-let.

‘First-time buyer’ also featured in the top five most searched for terms by brokers for the second consecutive month.

Looking to the residential market, ‘soft footprint at DIP stage’ returned to the top five most-searched terms after a month’s absence.

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The firm said this suggests brokers are looking for processes that will not impact future applications, due to clients having lower credit scores.

The rest of the top five were unchanged from January, with furlough again top of the searches.

‘Maximum age at end of term’ was again the second top searched term, with older clients looking for finance.

There was also more interest from those who are self-employed, with ‘self-employed – one year’s accounts’ in the top five for the tenth consecutive month.

The second charge market once again saw an interest in managing debt as two of the terms in the top five related to debt management.

In the bridging sector, ‘second charge loan’ was in the top five for the first time since October 2020.

Matthew Corker, operations director at Knowledge Bank, said: “The rental market in the UK is receiving a lot of interest at the moment.

“Perhaps as a result of the volatility in the stock market due to the pandemic, investors are turning to what they see as a safe investment.

“With house prices increasing in the past year and interest in rental properties also on the increase, this trend could be set to continue.

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“However, with the government announcing they would back 95% loan to value mortgages, this may help more first-time buyers onto the housing ladder, and may see less looking to rent in the future.

“The furlough scheme was again at the top of the list for brokers in the residential market, and the latest extension to the job support scheme will undoubtably result in more lenders adjusting criteria.

“The stamp duty extension may bring a raft of new clients to the market. However, they will need to move quickly as even with the extra three months, the deadline is still tight for those who have not already started the process.

“With these latest government decisions, lenders are certain to continue adapting criteria to keep up with the evolving market.

“With changes coming thick and fast, brokers could spend hours every day searching for the latest criteria, so using a comprehensive criteria search system can save them a massive amount of time and ensure they are providing best advice.”

By Jake Carter

Source: Mortgage Introducer

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Buy To Let purchase surge likely thanks to SDLT extension

A property lawyer is forecasting a surge in buy to let purchasing in the coming months as the stamp duty extension and the promise of low interest rates form an irresistible combination for investors.

That’s the view of property law firm Wilsons which believes Chancellor Rishi Sunak’s Budget will spur new investors.

In the fourth quarter of 2020, 61,800 buy to let properties were purchased, the highest quarterly figure since 2017. Wilsons says the SDLT holiday was a significant contributor to this upturn in property transactions.

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Buy to-let investors have purchased 102,267 properties since the SDLT holiday came into effect in July 2020.

Imogen Lea, a tax consultant at Wilsons, says: “The welcome three-month extension to the SDLT holiday gives potential property investors a second chance to purchase with no SDLT up to £500,000.

“The extension to properties valued at £250,000 or less, which will be introduced in July and run to September 30 could see more sustained growth in buy to let investments in parts of the country where property prices are lower, or in smaller dwellings.

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“The million-dollar question, is whether this will be enough to keep the market buoyant in the medium and long-term?

“Landlords are also hoping that the end of the lockdown will see young professionals, many of whom have spent much of the crisis staying at their parents’ homes, return to renting in city centres.”

Lea concludes: “Interest rates in the UK are likely to remain low for the foreseeable future, which should attract more investment to the residential property market versus virtually zero interest on bank deposits and government bonds.”

Source: Letting Agent Today

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Buy-to-let Investment – Newcastle Named As a BTL Hotspot

Newcastle is the top location for buy-to-let investment, according to data from lettings platform Mashroom.

For the most profit per calendar month excluding any fees such as interest and insurance, Newcastle is the best place for a buy-to-let scheme, gaining a profit of £233.76.

Mashroom looked at the average cost to buy a home in the millennial hotspot areas and compared it to the average monthly rent to find out where the most profit can be gained from buy-to-let investment.

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In contrast, millennials who are investing in a buy-to-let scheme within London are losing an estimated amount of £253.83 a month.

The data also shows the happiest tenants are in London, Manchester and Birmingham.

Mashroom found that three quarters of tenants describe relationships with their landlord as “good” and “very good” and 89% of landlords feel the same.

In addition, searches for let-to-buy schemes rose by 614.29% over the past year.

Stepan Dobrovolskly, chief executive of Mashroom, said: “Tenants and landlords often see each other as enemies, but a lack of communication is usually the reason why relationships break down.

“This could be because a letting agent or property manager is acting as the go-between but isn’t relaying the information correctly.

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“When landlords and tenants communicate directly, the results are better – whether it’s arranging repairs or paying the rent on time.

“From what we’ve seen, by having strong lines of communication, both landlords and tenants have more respect for each other.

“This builds healthier relationships that create a better renting environment for everyone involved.”

By Jake Carter

Source: Mortgage Introducer

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