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BTL mortgage availability at pandemic high

The availability of buy-to-let mortgages has remained relatively high during the pandemic, giving landlords cause for optimism, according to Moneyfacts.

Figures from the data provider showed there were 1,976 buy-to-let products available in mid-January, fewer than before the pandemic began but more than the 1,455 available in May.

The provider also suggested lender confidence as the number of deals available in the 80 per cent LTV tier has risen by 26 since December.

Average rates have also increased, with two- and five-year fixed rates standing at 2.92 per cent and 3.29 per cent respectively for all LTV brackets, the highest levels recorded by the provider since November 2019.

But Eleanor Williams, finance expert at Moneyfacts, warned the market has been “volatile” since the start of this year.

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She said: “Lenders have been adjusting their offerings and consequently availability continues to fluctuate – there are now 27 fewer mortgage products on offer than there were just a couple of weeks ago, and so those considering exploring a new BTL mortgage could do well to secure the knowledge and advice of a qualified adviser, to ensure they keep abreast of any relevant changes.”

Buy-to-let mortgage market analysis

PRODUCT NUMBERSJan-20Mar-20May-20Dec-20Jan-2115.1.21
BTL product count – fixed and variable rates2,5832,8971,4551,8182,0031,976
All 80% LTV BTL products – fixed and variable rates2973681974100100
AVERAGE RATESJan-20Mar-20May-20Dec-20Jan-2115.1.21
BTL two-year fixed – all LTVs2.82%2.77%2.51%2.89%2.89%2.92%
BTL five-year fixed – all LTVs3.19%3.24%2.94%3.25%3.27%3.29%
Data shown is as at first working day of month, unless otherwise stated. Source: Moneyfacts.co.uk

The Intermediary Mortgage Lenders Association has meanwhile highlighted the opportunity for remortgage business from landlords who took out five-year deals before the stamp duty surcharge was introduced in 2016.

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The trade association predicted the five-year anniversary of the surcharge would enable demand in the mortgage market to stay strong this year despite the end of the stamp duty holiday.

A survey by Paragon Bank also found that half of buy-to-let brokers said they would focus on five-year remortgage business when the stamp duty holiday ends.

But Kevin Dunn, director at Furnley House, commented that he expected demand to fall.

Mr Dunn said: “Whilst demand has remained strong in this area over the last six months, I expect demand in buy-to-let mortgages to decrease once the stamp duty holiday ends at the end of March, however not quite in the same way it fell off a cliff when the stamp duty surcharge was announced at the beginning of 2016.”

By Chloe Cheung

Source: FT Adviser

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23% more buy-to-let limited companies established in 2019

Landlords set up 41,700 buy-to-let limited companies in 2020, an increase of 23% on 2019, research from Hamptons has found.

Using a limited company enables landlords to save on tax after the reduction in mortgage tax relief.

Aneisha Beveridge, head of research at Hamptons, said: “Despite growth of the private rented sector slowing in recent years, an increasing proportion of buy-to-let purchases are now being held in limited companies.

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“We estimate that around half of all rental properties bought today are being put into a company, up from close to one-in-five during 2016.

“While most of this growth has been driven by larger landlords, smaller landlords, particularly those who are higher rate taxpayers, have also reaped the tax saving benefits from incorporating.”

More companies were set up to hold buy-to-let properties between the beginning of 2016 and the end of 2020 than in the preceding 50 years combined.

At the end of 2020 there were a total of 228,743 buy-to-let companies up and running, an all-time record.

Southern-based landlords have been most likely to incorporate. Given the high cost of property, generally landlords based in the South are more likely to be mortgaged which means that in cash terms their mortgage interest bill is likely to be higher.

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Therefore the benefits of incorporating a buy-to-let portfolio into a company are likely to be bigger.

More than a third (34%) of all companies set up to hold buy-to-let properties in 2020 were in London. Together, London and the South East accounted for almost half (47%) of all incorporations.

Beveridge added: “As the company buy-to-let market has matured, more mortgage lenders have entered the space.

“Back in 2016 there were just a handful of lenders who offered company buy-to-let mortgages, often at a greater premium than today.

“But with more high street names entering the limited company space in recent years, competition has driven down interest rates to within a percentage point of similar products designed for landlords purchasing in their own name.

“December marked the first time since the onset of the pandemic that prospective tenant numbers surpassed 2019 levels.

“At the same time, the number of rental homes on the market fell by double-digit percentages in every English region outside London.

“This has driven rental growth up significantly over the last three months to a point where rents are rising faster than house price growth in almost every region.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Almost half of BTL landlords remain optimistic despite potential tax hikes

Property investors have been the target of many recent tax changes and may feel unfairly targeted at a time when they are facing potential Covid-related tax hikes to pay for the pandemic, and yet almost half of those who invest in the private rented sector remain optimistic going into 2021.

Despite the challenges of the coronavirus, almost half – 45% – of landlords say they are currently optimistic about the buy-to-let market, according to a new survey released today by Property Master.

The online buy-to-let mortgage broker found that less than a third – 29% – of those surveyed were pessimistic about the buy-to-let market, despite fears that the chancellor Rishi Sunak could increase taxes for those with additional homes, as part of the government’s attempts to claw back the cost of extra spending during the coronavirus pandemic.

Mortgage interest relief changes, the scrapping of the ‘wear and tear’ allowance and the introduction of the 3% stamp duty surcharge have hit landlords’ profits over the past few of years, which partly explains why so many people are exiting the BTL market and thus reducing the supply of much needed private rented stock.

Tax and regulation changes continue to have a negative impact on the buy-to-let market, with a number of landlords selling properties with a view to reducing their portfolio, or exiting the market altogether.

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But despite the concern that yet another proposed tax hike could see buy-to-let landlords exiting the market in droves before it is introduced, just 10% of the landlords surveyed by Property Master planned to exit the buy-to-let market in 2021 and almost 70% said they were not about to sell any of their properties in the new year.

Angus Stewart, Property Master’s chief executive, said: “For landlords, as for many other sectors, 2020 is a year that brought plenty of challenges. But in the case of landlords Coronavirus and the resulting economic uncertainty came on the back of a raft of regulatory and tax changes over recent years that have left the sector battered and which saw smaller landlords in their thousands throw in the towel.”

Stewart continued: “However, our survey shows the buy to let sector as a whole is a resilient one. Those landlords that have survived may well be stronger and our survey shows them as giving buy to let the thumbs up as we move into 2021.

“We see the year as being one of two halves. There is clearly continued turbulence forecast for the first half of the year as coronavirus and Brexit play out. But the fundamentals of the private rented sector remain and now more than ever an increased number of people need a good quality roof over their heads, and this will create plenty of opportunity for landlords to do well.”

The number of landlords surveyed by Property Master who planned to add to their portfolio in the new year was evenly split with those who had decided in 2021 to stick with their existing property portfolio.

Almost 43% of landlords said they planned to buy more property in 2021 and the same number planned to stick with the properties they already had. Almost 13% were undecided.

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In terms of buy to let mortgage rates, landlords seemed more relaxed about the outlook although many commentators have recorded an increase in rates in recent months.

Almost 54% of landlords surveyed thought that buy to let mortgage rates would stay the same as opposed to almost 38% who thought they would increase further. Just under nine per cent thought rates would decrease despite the rumours about a possible negative Bank of England base rate.

Stewart added: “A competitive and innovative buy-to-let mortgage market has proved to be a big plus for the private rented sector. Inevitably, the coronavirus has led to some caution amongst lenders especially around loan to value ratios, but we see this as easing as the year plays out.”

By MARC DA SILVA

Source: Property Industry Eye

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Number of UK buy-to-let landlords has increased by 49% in five years

The number of UK buy-to-let landlords has risen 49% in the last five years to an all-time high of 2.7 million, research from ludlowthompson estate agents found.

The residential market has stayed relatively strong during the coronavirus pandemic, though the commercial property market has fared poorly, as 54% of tenants have held discussions with their landlords about taking a rent holiday.

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Stephen Ludlow, chairman of ludlowthompson, said: “The buy-to-let market has continued to provide a reliable return on investment for landlords, even during the worst of the pandemic when other forms of investments went through a period of intense volatility.”

“The historic resilience of residential property means many private investors are still looking to add to their holdings, particularly before March 2021 when the stamp duty holiday ends.”

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“We would advise existing and prospective landlords to consider re-purposing their properties to meet the changing needs of tenants.

“With people spending more time at home, having extra space both in and outdoors has become more important than ever. Outdoor areas and home offices are both in very high in demand, as is accessibility to high-speed WiFi.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Government urged to provide greater support for BTL landlords during this time

More money needs to be made available to support buy-to-let landlords during the existing Covid-19 pandemic, according to safeagent.

The letting agent accreditation scheme for lettings and management agents operating in the private rented sector has expressed fresh concerns that the challenges in the private rented sector are only going to increase as the pandemic continues to put a strain on the economy.

Safeagent is calling on the government to do more to help landlords with tenants who are facing financial hardship and unable to pay the rent, especially in light of the fact that repossession cases on the grounds of rent arrears will not be treated as a priority until tenants have built over a year’s worth of rent debts.

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Added to this is the six months’ notice that landlords now have to give. Where the case is disputed, even before the pandemic, courts were taking an average of almost six months to deal with cases, with the backlog now likely to be longer.

The Financial Conduct Authority (FCA) has issues its updated coronavirus guidance ‘Mortgages and Coronavirus: Payment Deferral Guidance’, stating that firms should allow customers to extend ongoing payment deferrals after 31 March 2021, to cover payments up to and including July 2021, but safeagent argues that a mortgage deferral alone is not the answer for buy-to-let landlords.

Isobel Thomson, safeagent chief executive, said: “It’s positive to see the FCA supporting borrowers impacted by the pandemic with this latest guidance which advises lenders should offer up to six months of mortgage payment deferrals and guarantee it won’t affect a landlord’s credit rating.

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“However, while buy-to-let landlords impacted by tenants’ rent arrears clearly need support, we question if deferral of mortgage payments is the answer, or if it pushes the problem further down the track. While lenders will be adhering to the guidance which provides up to six months deferral, we know it may take badly affected tenants much longer to get back on their feet, meaning landlords could be building up debt and struggling to meet mortgage payments for many months to come.

“We know the good work that agents and landlords are doing to sustain tenancies where tenants are in financial difficulties. But it’s vital that if we are going to keep landlords in the PRS, their financial viability is also maintained, ensuring no unnecessary reductions in the supply of rented housing and helping prevent homelessness.

“We believe there is more to be done. Our recent proposals for a sustainable post COVID PRS suggested that those landlords who build up debt because they are unable to pay entirely or are only partially paying what is due on their mortgage due to a shortfall in their tenant’s Universal Credit, should be eligible for a grant from the Government, similar to the coronavirus small business grant. This would recompense them for the shortfall on their mortgage and any additional interest over the period. This is particularly important for landlords with a small number of buy to let properties, who rely heavily on this income.

“safeagent is also calling on lenders to commit to no exclusions terms in new or existing buy-to-let products that prevent lettings to tenants who are claiming benefits. This is important to ensure tenants on benefits can continue to access the PRS now and in the future.”

By MARC DA SILVA

Source: Property Industry Eye

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Manchester is top UK location for buy-to-let investment

Manchester has been revealed as the top location for buy-to-let investment, according to Aldermore’s Buy-to-Let City Tracker.

Cambridge was noted as the second best location for BTL investment and London as the third.

The tracker analysed 50 cities from across the UK and assessed the best location based on average total rent, the best short-term returns through yield, long-term return through house price growth over the past decade, the lowest number of vacancies as a proportion of total housing stock, and percentage of the city population in the rental market.

According to the lender, significant investment in commercial and residential developments over the past five years in Manchester contributed to it being the top BTL investment location.

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The cities main selling points for private landlords include rental returns and long-term house price growth, but more importantly it has one of the biggest rental markets in the UK, with 31% of Manchester’s population being private renters.

In addition, it has low vacancy rates, above average rental prices and property prices increased by 4.1% annually.

Jon Cooper, head of mortgage distribution at Aldermore, said: “There has been a high level of uncertainty for landlords since the COVID-19 outbreak and they have had to continuously adapt to a raft of challenges but, with so many working from home right now, it reinforces the importance of a robust and diverse private rented sector.

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“The changing needs of renters, whether to move to a new location or a different type of property to fit flexible working demands, has created investment opportunities for landlords.

“The private rented sector is vital to the economy right now and its recovery from the pandemic so landlords should seek portfolio advice from their lenders to see how they can look at new ways to support the sector.”

By Jake Carter

Source: Mortgage Introducer

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More landlords look to expand outside London and the South East

One in 10 landlords plan to purchase buy-to-let properties this year, up from 3% at the end last year, Source Business research shows.

The rise in landlord confidence and a change in tenant priorities following the lockdowns is leading investors to a move away from London and the South East, to less built-up areas.

Increasingly tenants want greater home working space and leisure time, resulting into a spike in demand for larger properties.

Mish Liyanage, managing director of The Mistoria Group, said: “We are seeing a rise in professional landlords looking to acquire affordable terraced properties with gardens and apartments in the North West. Lower prices, high yields, expanding population and Northern Power house initiative/HS2 have contributed to this interest.

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“A significant proportion of the professional landlords that we work with are located in the Midlands and the South, but want to invest in the North West, because of the attractive property prices, high yields and occupancy rates. Many investors are moving away from London and the South East and are searching for regions that give them exceptional returns.”

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At the end of 2019, 82% of landlords claimed that they had no plans to acquire another property in 2020, while just 3% were intending to add more than a single property to their portfolio.

Soon after the stamp duty holiday was implemented, 10% of landlords said they are now planning to purchase more properties and build on their portfolio, while just 5% said they had any intention to sell any existing properties.

BY RYAN BEMBRIDGE

Source: Property Wire

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One in 10 BTL landlords plan to add to portfolios

One in 10 buy-to-let landlords are currently planning to expand their property portfolio over the next few months, according to new research.

With buy-to-let continuing to deliver solid returns, a fresh report from Simply Business shows that 10% of buy-to-let landlords are planning to add to their portfolio in the near term, compared to just 3% at the end of last year.

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Despite a challenging time for the market, characterised by tax and regulatory changes, not to mention Covid-19, investment in buy-to-let continues to outperform most major asset classes, as demand from private renters grows.

With savers receiving poor returns from banks and building societies, thousands of people continue to turn to residential property as a means of supplementing their income, supported by low mortgage borrowing rates, growing demand from renters and the current stamp duty holiday, as buy-to-let consolidates itself as the investment of choice for many investors.

Alan Thomas, UK CEO at Simply Business, said: “The coronavirus outbreak and consequent lockdowns have been transformational in UK renters’ attitudes towards property, and therefore where landlords are looking to make their next investment.”

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He added “There appears to be a shift in terms of what is considered a desirable property by tenants, and residential landlords – crucial to both the economy and the local communities where they provide housing – along with the market in general, are reacting to this.

“What is clear though, is that the UK buy-to-let market is going through somewhat of a transition, driven by a move away from the previous demand for city centre properties.”

By MARC DA SILVA

Source: Property Industry Eye

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Year-on-year yield strengthens in majority of UK regions

Rental yields have been strengthening in a majority of UK regions in Q3 according to the latest buy-to-let rental barometer.

The barometer shows rental yields on residential buy-to-let properties were 6.4% across England, up 0.4% from the 6% achieved in the third quarter of 2019.

The North East of England recorded the top rental yield regional figure for the quarter, up 2% year-on-year to 8.8%, whilst only the North West and the East Midlands showed slight drops in rental yields.

Last quarter only three regions posted positive rental yields over the period however seven regions, including the North East, Yorkshire and Humberside and the West Midlands, all posted increases.

Fleet said the overall data showed a more positive picture than three months ago, with a greater number of transactions and rental valuations “showing the strength of the private rental sector during the summer and through into autumn”.

The barometer highlighted the impact COVID-19 may potentially have on rental property within, and around, city centres with potentially tenants looking to live further away from those areas.

It suggested that curbs on foreign tourism may bring a greater supply of short-term lets to market in certain regions however an increase in ‘staycationing’ may ensure yields are not unduly impacted by the greater number of properties available.

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As with Q2 figures, this Q3 iteration of the Barometer does not include Wales as different lockdown rules apply.

Steve Cox, distribution director of Fleet Mortgages, said: “It’s clearly positive to see the majority of regions in England posting increases in rental yields, and those regions which have showed a very slight dip were already at relatively high levels to begin with.

“We learnt from the post-credit crunch period over a decade ago that rents are not as susceptible to a recession as property prices, with many occupants more willing to opt for the shorter-term financial commitment offered by renting than longer-term property ownership.

“While the economic backdrop is not pretty with the ongoing recession and uncertainty about the true impact on employment levels suggesting a negative outlook for rental demand, the early indications – as evidenced by our Barometer – are more promising with no suggestion of sharp falls in rental yields.

“Perhaps this is a result of pent-up demand and more households being formed as a result of the lockdown – we will get a better idea of the sustainability of this in the coming months.

“What we may however see, is further structural changes in rental demand, particularly in urban centres with tenants – who can now work from home – feeling they are no longer tied to a property near to the office, and may look further afield where they might get more for their money.

“However, we have not yet seen any evidence to suggest this is becoming a trend.

“Demand for rental property is clearly holding up in most regions and the underlying demographics suggest that property investment will remain a good choice in the years ahead.

“Within a shorter time-frame, the fact that – in England at least – the stamp duty holiday is available to landlord borrowers has undoubtedly been a factor in the increased interest in property investment purchases, with both new and existing landlords looking at the opportunities available, and seeking to secure the savings that are available from the holiday.

“Our next iteration of the Barometer will give us more evidence on the robustness of rental yields and whether the potential impacts of COVID-19 on households and living arrangements are playing out as they are perceived to be.”

By Jessica Nangle

Source: Mortgage Introducer

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A positive outlook for BTL: Seeking more than a room with a view

As the final quarter of 2020 begins – following an unprecedented six months – the buy-to-let (BTL) market is bouncing back strongly, in a way that few commentators predicted a few months ago, in my opinion.

The residential and buy-to-let markets both felt a significant impact during the initial stages of the pandemic. Public health measures made it difficult for surveyors to visit properties, contributing to nearly two months of disruption in the housing market. However, since property valuations became possible again, demand has returned, and the UK property market is demonstrating its resilience.

It has quickly become apparent to me that landlords and investors have not lost their appetite within the buy-to-let sector either. Demand for new tenancies has risen and historically such increases have often continued when supported by a growing market for property sales, as we are seeing now. The Chancellor’s stamp duty cut has further fuelled interest.

In fact, by July the number of new tenancies was nearly back to pre-pandemic levels, according to The Deposit Protection Service’s (DPS) quarterly Rent Index.

Most of the growth in new tenancies has been at properties owned by professional landlords, and we expect to see this trend increasing. Professional landlords with reliable portfolios of good properties are often in a better position to absorb financial shocks.

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According to the Savills Global Market Sentiment Survey, concerns over the pandemic are driving more UK residents to seek properties in rural locations.

The rise of home working means there are fewer benefits in living close to workplaces, particularly those in city centres. More people seem to be taking up the chance to find a property with a garden or a garage – or simply a bigger home, whether to accommodate greater home working or simply to enjoy more space. Such properties are more plentiful in the shires, meaning demand in urban areas may continue to fluctuate.

The Royal Institute of Charted Surveyors’ (RICS) August survey found that 83% of surveyors in the UK anticipate greater demand for homes with gardens or balconies in the next two years and that 68% expect the desirability of properties with a ‘more private’ outdoor space to grow. The increased demand for properties with specifically ‘roomier’ features has led to confidence in the housing market rising to a four-year high.

Overall, I believe this represents a relatively positive picture for brokers, professional landlords and buy-to-let investors. The fact that rates are low, loan-to-values (LTVs) are almost back to pre-pandemic levels can only go to support this positive picture.

Demand for rental properties is likely to increase in many areas, as renters seek tenancies with more than just ‘a room with a view’ to make staying and working at home more comfortable.

By Paul Fryers

Source: Mortgage Introducer