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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.

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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%).

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.

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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.

“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.

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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%.

“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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40% of FTBs in the UK have taken advantage of the stamp duty holiday

New research by regulated property buyers GoodMove has revealed that 39% of first-time buyers in the UK have taken advantage of the stamp duty holiday, and a further 8% have not yet bought a home but are planning on using the stamp duty holiday extension to do so.

Those aged 25-44 are most likely to have taken advantage of the stamp duty holiday in the past year at 42%, and 18–24-year-olds are most likely to say they either haven’t taken advantage of Stamp Duty when they bought their home (50%) and say they won’t take advantage of the holiday in the future (10%).

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House prices and deposits are at an all-time high now, with first-time buyers now requiring up to 20% of a property’s value for a deposit. GoodMove’s research found that most (53%) have saved for a house deposit by themselves, with a further 34% having help from their parents or other family members to secure a deposit.

Over a quarter (28%) of people have received money for their deposit through inheritance, 11% of Brits have taken out a loan to help them buy a home and 10% have received help from government schemes. Nearly one in ten (8%) said they have won a lot of money in the past and this helped them secure a house deposit.

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When asked what the most complicated part of the home buying process was, the top reasons were saving up for a deposit (33%), finding a good mortgage deal (32%) and the mortgage application process (28%). Just 2% of respondents didn’t think any part of the process was difficult or complicated.

Nima Ghasri, director at GoodMove, said: “First-time buyers generally have the hardest time buying a home, with securing a deposit and mortgage approvals among the hardest part of getting on the property ladder. In this campaign, we wanted to see exactly how first-time buyers and those looking to buy a home in the immediate future have bought their home and secured their deposit as well as what they found the hardest part to be.

“It’s great to see so many first-time buyers taking advantage of government schemes and also securing deposits by themselves and proves to us that the property market isn’t all that bad for first-time buyers and people can get onto the property ladder!”

Source: Property Wire

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Bank of England: Mortgage borrowing reaches five-year high in February

Individuals secured an additional £6.2 billion in mortgage borrowing in February which is the strongest level since March 2016, the latest Bank of England (BoE) figures have revealed.

The latest data showed it was not just net borrowing which was buoyant last month, but there were also a high number of approvals.

The 87,700 approvals, although down on the peak of 103,700 in November 2020, were still well above the monthly average in the six months to February 2020, which was 67,300.

The BoE Money and Credit report for February 2021 also reported approvals for remortgages with a different lender increased slightly from 32,600 to 34,300 between January and February.

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When it came to gross borrowing the figure reached £27.7 billion which was very close the March 2016 figure of £27.9 billion.

The BoE data also revealed the ‘effective’ rate – the actual interest rates paid – on newly drawn mortgages increased by six basis points to 1.91% in February.

It said this was slightly higher than the rate in January 2020 (1.85%), and compared with a series low of 1.72% in August 2020. The rate on the outstanding stock of mortgages remained at series low (2.09%).

The BoE thought the strong borrowing figures were caused by the flurry of activity as buyers rushed to meet the original stamp duty holiday deadline of 31 March.

But John Phillips, national operations director, Just Mortgages and Spicerhaart said thought there were other influencing factors at play.

He said: “This is only part of the story. A year on from the start of the first lockdown, what is clear is that the pandemic has spurred people into action.

“Whether it is those looking to move for more outside space. Or the lack of commute meaning some are choosing to leave the city, in a year where our lives were turned upside down, priorities were shaken up.

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“With the extension to the stamp duty holiday, the reintroduction of 95% LTV mortgages and the furlough scheme running till September, the property market should keep moving at a pace and we may see records broken for the first quarter of 2021.”

Meanwhile Jonathan Sealey, CEO of specialist short term lender Hope Capital, said the figures were also testament to the hard work of everyone involved with the property and mortgage industry.

“All those involved in the sector should take credit for that, and initiatives such as virtual viewings and the introduction of new products during the lockdown, have contributed to the property market staying operational,” he said.

“It’s also been an opportunity for specialist lenders particularly who have been able demonstrate the agility and speed that sets them apart from high street lenders, in ensuring people can get their deals over the line, no matter what else is happening.”

By Kate Saines

Source: Mortgage Finance Gazette

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Lockdown helped third of homebuyers get onto the property ladder

A third of UK homebuyers have been helped onto the property ladder due to lockdown according to new research by Yes Homebuyers.

The research found that for 27% of recent homebuyers say the restrictions of the lockdown due to the COVID-19 pandemic meant they were able to save to get a property, with 46% of those asked stating that the drastically reduced spend across their social life helped them to get a foot on the ladder.

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A further 33% said working from home and a lack of commuting helped their savings, a reduction in family costs helped 10%, while 6% received an inheritance due to bereavement and 5% saved on rent due to moving back home with their parents.

Matthew Cooper, founder and managing director of Yes Homebuyers, commented: “There’s no-one on the planet who wouldn’t like to erase the last year from history and lockdown has been hard for so many people for a whole variety of reasons.

“At the same time, there have been some great stories of resolve, survival and adaptation emerging across all areas of life and this is indicative of our nation and how we come together when times are tough.

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“While we’re all chomping at the bit to get back to some form of normality, it’s also great to see that for a third of homebuyers lockdown has, at least, helped them to achieve their goals of homeownership.

“With little else to spend our money on and a further saving due to the stamp duty holiday, there’s never been a better time to get a foot on the ladder and hopefully, many more will continue to benefit.”

Source: Property Wire

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House prices increased 7.5% in the year to January 2021

Average UK house prices increased by 7.5% in the year to January 2021, according to the latest House Price Index by the Office for National Statistics (ONS).

Prices rose by the greatest margin in Wales, increasing by 9.6% to £179,000, this was followed by England, where prices rose by 7.5% to £267,000.

Prices in Scotland increased by 6.9% to £164,000, and in Northern Ireland to £148,000, up 5.3%.

The North West was the English region, which saw the highest annual growth in average house prices up 12.0%.

In contrast, the West Midlands noted the lowest at 4.7%.

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Tahir Farooqui, chief executive of Canopy, said: “With a further increase to house prices comes an even bigger gap between hopeful first-time buyers and their new home.

“While the government is promoting a range of incentives such as 95% mortgages and a tapered end to the stamp duty holiday, it’s not addressing the true problem.

“House prices are too high and securing an affordable mortgage is a pipe-dream for many.

“One way to put to good use the £64,000 of rental payments that the average tenant spends before buying their first home, is rent tracking.

“This means each monthly payment builds up their credit score, ensuring they have better access to financial products when the time comes to secure a mortgage. A strong credit score is a foundation for financial freedom.”

Rich Horner, head of individual protection at MetLife, added: “The market is finally breathing a sigh of relief with today’s data showing strong house price growth, that will only continue to be fuelled by the Chancellor’s move to extend the stamp duty holiday.

“For the next few months, at least, buyers will be encouraged to continue their property search and make moves before June.

“There still remains an element of worry around what the second half of the year looks like as the property market, and society more broadly, returns to a level of normality after more than a year of lockdown.

“But pent up demand and a supply shortfall will work in the favour of sellers to buoy property prices.

“However, at the lower end of the market a level of reservation could move in. For a significant number the events of the past 12 months have left them in an ambiguous financial position.”

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Miles Robinson, head of mortgages at Trussle, said: “Despite a slight fall in house prices month-on-month from December 2020 to January 2021, it’s important to note that house prices are still significantly higher than the same period last year.

“Traditionally, the property market is quieter at the beginning of the year and it’s Spring that tends to spark a change in buyer momentum.

“However, buyer demand has remained strong throughout 2021.

“At Trussle we saw a 15% increase in mortgage applications in January and a 17% increase in February, when comparing the same periods year-on year.

“The recent Budget announcement confirming an extension to the stamp duty holiday, as well as a 95% mortgage guarantee scheme is likely to continue to boost buyer demand.

“This in turn could elevate house prices even further.”

By Jake Carter

Source: Mortgage Introducer

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Sales of holiday homes on the coast surge

Sales of holiday homes near the coast have surged over the past six months, with holiday let mortgages for properties in Wales almost doubling since September 2020.

Figures from Hodge Bank has revealed the most popular destination for holiday let buyers is the South West at 39%, followed by Wales at 19% and the North West at 12%.

Welsh purchases have almost doubled since September 2020, increasing from 10% to 19%, with coastlines around the North, including Pwllheli, Holyhead and Llandudno proving hugely popular for holiday homes.

The data also shows that the average age of a holiday let mortgage customer is 51.

Hodge customers are willing to spend on average £403,143 on a holiday home – nearly two thirds higher than the average house price in the UK of £252,000.

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Of those purchasing a holiday home, 35% remortgage their existing home to finance their holiday home while 65% take out a new holiday let specific mortgage.

With travel hugely restricted and people re-evaluating their holiday plans during the COVID-19 pandemic, the data shows that customers clearly want to head to the coast, with beach resorts in the South West proving hugely popular.

Newquay, St Ives and Penzance in Cornwall are real hotspots as are Wadebridge, Padstow and Port Isaac.

Over the past six months, Wales has also soared in popularity, especially around the North West in Pwllheli, Holyhead and Rhosneigr.

Devon also holds a lot of appeal, with the likes of Bideford, Ilfracombe and Barnstaple proving popular.

The least popular regions with only 1% of purchases are Greater London and the East Midlands, with West Midlands and the South East at 2% for those buying holiday lets.

Emma Graham, business development director at Hodge, said: “Many people have not been able to holiday abroad for more than a year now and staycations have therefore become hugely popular.

“We think this has almost certainly led to people re-evaluating their finances, as well as holiday plans and the holiday let market is looking very healthy.

“Given the appetite for a holiday by the sea, it’s no surprise that homes near the beach or coast are the most popular for holiday homes.

“In 2019, Hodge launched a mortgage designed for those wanting to own a holiday let property in the UK after seeing an increase in enquiries.

“We saw a gap in the holiday let mortgage market for a customer-friendly product that allows owners to stay at the property for a longer period, as well as the ability to use letting sites.

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“Customers can borrow up to £1m and there is a maximum lending age of 95.

“In addition, we have the unique Hodge Early Repayment Promise, which means if the customer sells their home and moves out, and pays off their mortgage completely, we’ll waive the Early Repayment Charges – giving them one less thing to worry about.

“Following Brexit and the COVID-19 pandemic, we think staycationing is here to stay and we want to help would-be holiday homeowners make that all-important purchase.

“We are able to offer customers up to three holiday let mortgages too, so if they want to purchase a property in more than one location, we can help.”

By Jessica Nangle

Source: Mortgage Introducer

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Investors to inject tens of thousands into property

Investors are sitting on an average of more than £37,000 each in investment capital that they are poised to inject into property, according to a study by property investment platform Brickowner.

The property investment platform polled 126 investors about their investment intentions as the national COVID-19 vaccine, which is set to be the UK’s roadmap out of lockdown, continued. Asked how much money they had “allocated to invest into property via platforms or direct”, the average response was £37,345.

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Users were also asked to state what type of investment would interest them, with the most popular emerging as residential (67%), followed by commercial (48%) and care homes (42%). The average annual return they were looking for was 8.4% and the average most desired fixed term was two years and eight months.

Brickowner’s co-founder and chief executive Fred Bristol said: “The pandemic is very likely to have had a chilling effect on the enthusiasm of property investors over the last year – but there are real reasons for optimism.

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“First, it’s clear from surveys like ours that investors have not lost their love of property and want to invest. And, second, we are already seeing early signs of a turnaround that may be linked in part to the successful vaccine roll-out, a key precondition for the re-opening of the UK economy.

“Activity on Brickowner’s platform has risen dramatically since New Year. In fact, the amount invested in first two months of 2021 was almost double that of the last two months of 2020.”

Source: Property Wire

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Property industry has a new spring in its step

The property sector has a renewed sense of optimism a year after the country was put into its first lockdown, with more than 75% of people reporting they feel more positive about the sector’s future than three months ago, the latest Property Week sentiment survey reveals.

Some 42.5% of respondents said they felt slightly more optimistic about the future of UK real estate, and 36.7% much more optimistic, than the previous quarterly survey in December. Some 14.2% felt the same and just 6.4% felt more pessimistic.

In the previous survey at the end of December, just 53% were more optimistic about the future, compared with 23% that were more pessimistic and 24% whose views had not changed since September.

More than half of respondents expected to return to offices ahead of the official projected end to working from home guidance on 21 June if they had not already. Some 26.7% said they were already fully or partly back in the office and a further 29.2% expect to return before the June date. While 33.3% said they expected to return after June this year, 10.8% said they did not expect to return to the office.

Retail was resoundingly forecast as the sector that would be hardest hit by the pandemic in the long term, (62.5%) followed by restaurants and pubs (18.3%). But property experts are nevertheless optimistic about the sectors’ futures.

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Sovereign Centros chief executive Chris Geaves said apart from areas overexposed to it, there remained a “very strong” future for bricks-and-mortar retail.

“We’ve got a very strong future for one simple reason: the UK is a nation of shoppers,” he said. “You can’t paint all retail with the same brush, you’ve got to look at every location differently.”

He added that the eight super regional shopping centres, which include the likes of Trafford, Metrocentre and Meadowhall, were “irreplaceable stock” and would only “expand and get bigger”.

Ted Schama, joint managing partner at leisure and hospitality agency Shelley Sandzer, told Property Week: “The market has been more active than we might have anticipated at the start to the middle of the pandemic. There are more experiential leisure opportunities than ever due to vacancies of retail space on the high street.”

Jonny Perkins, retail asset manager at LabTech, agreed there is a “positive sentiment in the air” for the leisure sector.

“It has undoubtedly been a difficult time for retail, leisure and restaurant occupiers in the current climate. However, with the positive sentiment in the air from the vaccine and a reduction in cases, we have experienced a noticeable increase in occupier enquiries and interest for the first part of 2021.”

He added: “Demand has appeared to be focused on the food and beverage and leisure sectors, with retail being more measured.”

Quintain chief executive James Saunders said the Wembley Park developer was optimistic that large hospitality venues would also be able to reopen this year as planned.

“We are cautiously confident that our major venues including the SSE Arena and Troubadour Theatre will adapt and find a way to welcome back audiences later this year,” he said.

The hotel sector also has a positive outlook on the coming months. “There is a huge amount of pent-up demand and we are seeing real appetite for growth, as well as people being desperate to travel,” said IHG UK&I managing director Karen Khanna.

Some 15% of survey respondents thought offices would be the hardest hit sector coming out of the pandemic.

Martin Lay, head of central London offices at Cushman & Wakefield, said: “The start of lockdown in January was a backwards step coming off a strong Q4 in 2020, which dampened optimism.”

He added that international investors were circling the London market ahead of travel restrictions lifting, but that activity was “likely to be held back” by lower levels of available stock.

“While the breadth and depth of international capital focused on London remains strong, activity is more likely to be held back by the lack of available investment stock, with 2021 seeing a 40% reduction in new stock being launched to the market compared with last year,” he said, adding that “the ESG agenda is becoming an increasingly important driver to investors’ decision-making, which we expect to translate into a significant focus on assets that are best in class”.

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Most respondents believed industrial would come out of the crisis the strongest in the long term (56.7%), followed by residential at 29.2%.

AXA Investment Managers head of residential and student accommodation Joe Persechino told Property Week that growth in the number of young professionals supported by a burgeoning student population and the gradual recovery of the labour market would drive “modest” demand for private rental housing in the coming years.

He added: “The weight of capital seeking stable income returns together with the relative lack of depth in institutional standing stock, is driving significant investment into development. Strong occupancy and collection rates are reinforcing investor conviction, and a relatively attractive spread to comparative opportunities elsewhere in Europe is supporting pricing at today’s yields.”

By Emma Shone, Jessica Newman

Source: Property Week

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More Mortgages Agreed by Lenders in Early 2021

Mortgage commitments agreed by lenders were a quarter more at the end of 2020 than at the end of 2019, the private investor platform Hargreaves Lansdown has highlighted.

Advances actually paid in the fourth quarter of 2020) were also up on the same quarter a year earlier, but this time by only 4.2 per cent. In the year as a whole they were unsurprisingly down by 9.8 per cent.

The value of balances in arrears rose by 3.4 per cent in the last quarter and is now just under 1 per cent of all mortgage balances.

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‘The race for space has turned out to be more of a marathon than a sprint’, said Hargreaves Lansdown personal finance analyst Sarah Coles.

‘We’ve been snapping up mortgages at the fastest rate since the onset of the financial crisis – and that was even before we knew the stamp duty holiday would be extended.

‘The mortgage market was booming at the end of last year, and the mortgages being agreed for the start of 2021 were at their highest for 14 years’.

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Meanwhile, arrears are starting to grow, said Coles. But ‘let’s not get ahead of ourselves, arrears are still incredibly low: right now they’re at 0.93 per cent compared to 3.64 per cent in early 2009. However, during the pandemic millions of borrowers have been able to rely on payment holidays, so have been able to avoid paying without running up arrears. Now that support is winding down, anyone who’s still struggling is running out of road. When the FCA asked people in October, 19.6m expected to be struggling to pay the bills or service their debts by April. By the time we get the March figures, arrears could look much worse’.

Source: Landlord Knowledge

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HMRC: Highest number of February residential transactions since 2007

The provisional seasonally adjusted estimate of UK residential transactions in February 2021 was 147,050, up 48.5% annually, according to the latest HMRC Property Transaction data.

On a monthly basis the estimate is also up 23%, and these figures are the highest number for the month of February since 2007.

Looking to the estimate of UK non-residential transactions in February 2021, this was up 10.2% year-on-year to 10,630, and 25.8% higher than January 2021.

The non-seasonally adjusted estimate of UK residential transactions in February 2021 was 122,840, 48.3% higher than February 2020 and 26.4% higher than January 2021.

Non-seasonally adjusted non-residential transactions in February 2021 was 9,230, 9.9% higher annually and 27.7% higher than the month prior.

Guy Gittins, chief executive of Chestertons, added: “While there is no doubt that there are a lot of people very keen to move home, many didn’t feel comfortable starting the process until they had some idea of when the country might be out of lockdown.

“Once this was provided, we noticed an immediate uplift in new buyers registering with us, and the subsequent announcement confirming the extension of the stamp duty holiday only added to this.

“As the country emerges from lockdown, we expect moving home will be many people’s top priority; just as we saw after the first lockdown; and are therefore anticipating a very busy spring and summer market.

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“We currently have around 70% more properties on the market for sale than we did last year.

“This is good news for buyers as it means that substantial price increases are relatively unlikely for the time being and that there are generally more homes to choose from.”

David Whittaker, chief executive at Keystone Property Finance, added: “Putting these figures into context, today’s HMRC data looks at property transactions before the stamp duty land tax holiday was extended in the Chancellor’s Budget this March.

“As was speculated at the time, today’s figures confirm many purchases rushed through in February as buyers and sellers took advantage of the tax break.

“The stamp duty holiday presents an excellent opportunity for landlords looking to increase their portfolio and cash in on the tax break, however there are significant challenges to navigate as well. 2020 was a challenging year for the buy-to-let market.

“We saw a raft of regulatory changes in areas from energy rating requirements to mortgage payment tax relief and unprecedented market conditions of surging demand paired with limited capacity while working from home.

“These factors have created an unfamiliar market for even experienced landlords.

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“In these times, it is even more essential that borrowers are seeking broker support and guidance to help them secure the best product available.”

Tomer Aboody, director of property lender MT Finance, also reacted to these figures: “With the strongest housing market in more than a decade, both home buyers and investors are taking advantage of historically low borrowing rates.”These favour both those buying a property to live in and those seeking rental assets for yield, significantly boosting the number of transactions.

“With the extension of the stamp duty break, further buyers have decided that now is the time to buy with a potential saving of up to £15,000 to tempt them.

“This saving, along with high loan-to-values and cheaper mortgages, is making this a sellers’ market, with buyers waiting in the wings to pounce.

“Many are prepared to pay higher prices than the past few years so as not to miss out, which is pushing values even higher.”

By Jake Carter

Source: Mortgage Introducer

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