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Buy-to-let yields improve in the North East

Buy-to-let yields in the North East have increased by 0.12% to 5.09% in the first quarter of 2020, research from peer-to-peer investment platform Sourced Capital has found.

At the other end of the spectrum they’ve fallen by -0.22% in London to 4.10%.

Stephen Moss, managing director of Sourced Capital, said: “Turning a profit in the buy-to-let sector remains a tough ask with a number of government changes denting profitability and yields remaining largely flat.

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“With COVID-19 presenting additional hurdles such as rental arrears and longer void periods, many are now turning to alternative options such as the peer to peer sector for a safer, more hands-off investment.

“However, that’s not to say that a buy-to-let property won’t make a great investment should you place your money in the right pockets of the market. Buy-to-let returns are based on fine margins and so an annual increase of 0.7% isn’t as insignificant as it may seem.”

Across England they’ve typically fallen by -0.1% year-on-year.

Looking more locally, Corby has seen an uplift of 0.7% on an annual basis. Charnwood, Newcastle and Exeter have also seen positive growth with a jump of 0.5%.

Harlow in Essex and the Orkney Islands have enjoyed a 0.4% increase, along with Ealing which enjoyed the largest increase of all London boroughs.

BY RYAN BEMBRIDGE

Source: Property Wire

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Landlords who sold in 2019 made capital gains of £78,100

Landlords who sold properties in 2019 typically owned the home for 9.1 years and sold it for £78,100 more than they paid for it.

People selling in London made the biggest gains, with the average London landlord making £253,580, over 20 times that of a seller in the North East (£11,710).

Research from Hamptons International found that 84% of landlords who sold their buy-to-let property in England and Wales last year made a gross capital gain, with only 16% making a loss.

Aneisha Beveridge, head of research at Hamptons International, said: “The profitability of the buy-to-let market has been questioned in recent years and is one of the main reasons why some landlords have chosen to sell up.

“But one of the biggest bonuses from cashing in comes from the capital gain on a property. Over a third of landlords’ total return comes from capital growth rather than rental income in Great Britain.

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“Landlords in the South, where house prices are higher and historic price growth has been stronger, saw the greatest capital gains last year. In fact, the average London landlord gain was over 20 times that of a seller in the North East where landlords are more reliant on rental income.

“But with house price growth expected to stay lower than in the past, more landlords are having to switch their focus to maximise rental income, rather than rely on capital growth.

Last year an estimated 150,000 properties were sold by landlords in England and Wales.

Beveridge added: “The profitability of the buy-to-let market has been questioned in recent years and is one of the main reasons why some have chosen to sell up.

“But one of the biggest bonuses from cashing in comes from the capital gain on a property. Over a third of landlords’ total return comes from capital growth rather than rental income in Great Britain.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Early signs of BTL mortgage market recovery

Moneyfacts UK Mortgage Trends Treasury Report data, not yet published, reveals that there are glimmers of hope emerging for the Buy to Let mortgage market, following the significant initial impact of the Coronavirus pandemic. In welcome news to many landlords, the choice in products has increased, and some higher loan-to-value (LTV) average rates have reduced. These shifts are likely to be linked with lenders’ focus on supporting existing borrowers alleviating and of course the Government guidance on valuation restrictions lifting.

Overall, there are 280 more BTL products available now than there were at the start of May 2020. The product choice at 75% LTV has increased by 46 two year fixed rate deals and 54 more products are available in the five year fixed rate bracket. The picture at 80% LTV is similar, with this traditionally smaller sector increasing by 26 two year fixed rate products and 20 more options available for those seeking a five year fixed rate over the month.

Average interest rates on fixed BTL mortgages have risen slightly for two and five year fixed rates overall, likely due to the increase in the number of products that these averages are based on. However, there is cause for celebration for landlords who have only a 20% deposit available, as rates on both two and five year fixed rate BTL products at 80% LTV have reduced, by 0.49% and 0.67% respectively, which will be great news for those considering purchasing or at remortgaging at this LTV.

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Buy-to-let market analysis
Product numbersMay-20Jun-20Difference
BTL product count (fixed and variable)14551735280
Two-year fixed rate BTL all LTVs491597106
Two-year fixed rate BTL at 75% LTV16521146
Two-year fixed rate BTL at 80% LTV93526
Five-year fixed rate BTL all LTVs480607127
Five-year fixed rate BTL at 75% LTV17623054
Five-year fixed rate BTL at 80% LTV62620
Average ratesMay-20Jun-20Difference
Two-year fixed rate BTL all LTVs2.51%2.59%0.08%
Two-year fixed rate BTL at 75% LTV2.60%2.64%0.04%
Two-year fixed rate BTL at 80% LTV3.61%3.12%-0.49%
Five-year fixed rate BTL all LTVs2.94%3.03%0.09%
Five-year fixed rate BTL at 75% LTV3.15%3.17%0.02%
Five-year fixed rate BTL at 80% LTV4.32%3.65%-0.67%
Source: Moneyfacts Treasury Reports. Data shown is as at the first of the month unless otherwise stated.

Eleanor Williams, Finance Expert at Moneyfacts, said:

“The Bank of England base rate currently remains at its lowest ever level of 0.10%, resulting in further despair for savers. However, those looking to invest their money in property now that the mortgage market has reopened may feel now is a good time to explore their options, particularly with rates becoming more competitive and product choice beginning to return this month.

“A recent survey from Rightmove, which was conducted as the property market reopened at the end of May 2020, revealed that demand from tenants for rental properties increased by 33% when compared to the same time period last year. Therefore, the increase in buy-to-let product choice will be welcome news to landlords.

“This positive growth in choice is reflected in the higher LTV tiers, with deals for landlords with just a 25% or 20% deposit or equity keeping pace across two and five-year fixed rate options. This is encouraging considering that early in the Covid-19 crisis, providers were focused on supporting existing customers and restrictions meant that physical valuations were not feasible, seeing many lenders reduce their offerings to lower risk, lower LTV products. These developments left those with less equity or deposit un-catered for.

“Average rates have increased slightly over the last month, likely impacted by the higher number of mortgage products available from which this average is calculated. The overall two-year fixed rate sees a 0.08% rise, while the five-year fixed equivalent increased by 0.09%. However, landlords who may be concerned about increasing mortgage rates will be heartened to see that at 80% LTV, the two-year fixed average rate has dropped month-on-month. In this same bracket, those looking for longer-term protection from interest rate volatility and considering locking into a five-year fixed rate deal will also find rates have fallen over the same period – which sees it sit lower than the March 2020 figure of 3.98% as a result.

“As we begin to see indications that the buy-to-let market may be starting to recover, the full economic impact of the current crisis is still not yet clear for tenants and landlords alike. However, those who are in a position to consider capitalising on possible falls in house prices to expand their property portfolios or indeed those looking to switch their current deal, may wish to move quickly. If they do decide to make a move, they would be wise to seek advice from an independent, qualified financial adviser regarding their options, as criteria and requirements continue to be updated.”

Source: Property118

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Buy-to-let activity was strong in Q1

Buy-to-let house purchases increased by 7% in Q1 2020 year-on-year, UK Finance figures show.

Contrastingly first-time buyer numbers fell – resulting in overall mortgage lending being flat year-on-year.

John Goodall, chief executive at Landbay, said: “Buy-to-let started the year really strongly and this is reflected in the UK Finance figures.

“January and February saw really strong demand for new purchases.; UK Finance shows a 7% year-on-year increase, but what we saw was significantly in excess of that.

“While the Coronavirus lockdown from mid-March has hampered this, there is still a notable demand from landlords and investors.

“What these figures don’t show is the effect of payment holidays. While there is demand, borrowers who are trying to take out new mortgages whilst also taking payment holidays on existing parts of their portfolio may find it harder to buy than they did before.

“While there is no chance that we will jump straight back to the numbers we saw at the start of the year, as soon as confidence returns the market should also return to normal, although I don’t expect a ‘V’ shaped recovery, but a longer, more gradual increase.”

Eric Leenders, managing director of personal finance at UK Finance, said: “Following a subdued year in the mortgage market in 2019, any signs we might have seen of improving confidence translating into increased homemover activity at the turn of this year have currently been overtaken by the impact of the Covid-19 pandemic.

“This review does not capture the various support measures to households that the industry has enacted, such as three-month payment holidays and a repossession moratorium.

“By mid-May approximately 1.8 million mortgage payment deferrals had been arranged for customers.

“Similar payment holidays for personal loans and credit cards were introduced at the end of March and will be reviewed in depth in our next household finance review.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Landlords on payment holidays denied buy to let mortgages

Landlords who have taken a payment holiday because tenants are unable to pay their rent are being rejected for mortgages to buy new properties.

Buy-to-let borrowers are urged to think carefully before taking a break in repayments, especially if they are planning on adding to their portfolio in the near future.

As with residential mortgages, landlords have been able to access a break in mortgage repayments for three months since March.

Recent guidance from the Financial Conduct Authority (FCA) means extensions of a further three months are available, with applications for a pause open until the end of October.

Payment breaks do not negatively affect credit files and this appears to be giving the impression that the ability to borrow is not impacted.

The regulator warned that “credit files aren’t the only source of information which lenders can use to assess creditworthiness”.

And lenders are now turning down purchase applications if repayments are not being made on one of the properties in the portfolio.

‘Use as a last resort’
A number of advisers told our sister title, Mortgage Solutions, they have seen this happen in recent weeks.

Edward Peters, buy-to-let specialist broker at Mortgage 1st, said he had several instances where payment holidays were “interfering with mortgage applications” across different lenders.

He added: “People are aware these don’t show as mortgage arrears on credit reports, but this has been extrapolated to a belief that coronavirus holidays have no effect.

“Lenders will often ask if any holidays have been taken on any properties in the portfolio, and this may well affect their lending decision.

“So far, most holidays I’ve come across have been requested only as a precaution against rental defaults, and not to offset an actual reduction in income.

“Landlords need to think carefully when requesting a holiday, especially if other applications are imminent or in progress.

“It’s easy to understand the lenders’ mentality on this. A payment holiday is effectively an admission of not being able to cover the mortgage payment, and so should be used only as a last resort.”

As part of measures to ease financial pressures on households, possessions and evictions are also currently barred.

Landlords have in some cases arguably been encouraged to take payment breaks if tenants cannot pay rents.

For example, Nationwide said it is contacting all its landlord borrowers to let them know holidays are available where rent is not being paid.

Not ‘in the spirit’ of situation
The National Residential Landlords Association said turning down borrowing applications was “not in the spirit” of the special coronavirus measures implemented by the FCA and the government.

John Stewart, deputy policy director for the trade body, said: “The Financial Conduct Authority has been clear that where mortgage holidays are secured in response to coronavirus they should not have a negative impact on the applicant’s credit file.

“It is therefore deeply disappointing that there are lenders not abiding by the spirit of these guidelines, and are failing to support otherwise reliable customers.

“It should not be right that landlords seeking to support tenants genuinely struggling due to the pandemic are being penalised in this way.”

Emergency break
Chris Sykes, mortgage consultant at Private Finance said he could see it from the perspective of both lenders and landlords.

Landlords who are not repaying debt on one property do not appear to be a good lending risk.

Sykes said he also understood why landlords were taking a holiday even if they do have savings and could maybe want to grow their portfolio to spread risk.

He added: “This is a short-term measure and I don’t expect we will see it being an issue in six months’ time as it leaves no lasting negative on the credit file as confirmed by Experian and Equifax.

“We are all aware it isn’t a great situation right now for a lot of people and hopefully these things are only short-term.

“However, I do not think people realise the affect it can have, maybe they should be called an emergency payment break rather than a holiday.”

Written by: Lana Clements

Source: Your Money

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Liverpool named UK’s best buy-to-let area to invest in

New research has identified Liverpool as one of the best places in the UK for buy-to-let investors, with yields as high as 10.30%.

The findings are from analysis by Mojo Mortgages using the UK Land Registry, Zoopla, On The Market and property data portal, PropertyData.co.uk in a bid to find where the current investment hotspots are.

Mojo said: “From our analysis, the North West is one of the top regions for strong buy-to-let yields. As well as a number of profitable areas in Liverpool, the area of M14 in Manchester, which covers Fallowfield, has a yield of 7.60%.

“Both these cities have a solid student population, plus property prices are relatively low.”

In the UK there are an estimated 2.6 million buy-to-let landlords, and despite the pandemic, those who do have the cash to invest believe investment opportunities will emerge, with lenders cutting rates on buy-to-let products and raising affordability thresholds.

There’s also market sentiment which is leaning towards limiting competition from other buyers and even pushing up demand for rental property.

From its analysis, Mojo found that Liverpool is currently the best place to consider.

The city’s L7 postcode tops the buy-to-let yield table, generating yields of 10.30% and an average asking price of £95,000.

The postcode covers the area of Edge Hill and is in close proximity to Liverpool city centre.

Five more Liverpool postcodes feature in the top 20 list of best places to invest, with yield returns ranging from 7.40% to 10.30%.

Birkenhead’s CH41 postcode came in at 17th in the list, with a return of 7.10% and an average asking price of £84,000.

Eight of the top 10 worst places to invest were in London or the South East, topped by Kensington and Chelsea, with an average yield of 2.1% and an average asking price of £1,612,797.

By Neil Hodgson

Source: The Business Desk

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Buy to let specialist reports surge in North West rent prices

Rents in the North West are growing faster than any other region in the UK, with rental growth in London continuing to slow over the past few months.

That is the claim by high-yielding student buy-to-let investment specialist Mistoria Group.

It said rental values in the North East, North West, East Midlands, Scotland, Yorkshire & Humberside, Northern Ireland and Wales all rose at a rate faster than the UK average. (Source: The HomeLet Rental Index, March 2020).

Average rents across the UK rose by 1.8% in March 2020 year-on-year, with the average monthly rent sitting at £959 per month.

When London is excluded, the average UK rental value was £793 in March 2020, up 1.4% on last year.

The data also reveals that rents rose from last year in nine out of 12 of the regions covered in the research.

Data from The Mistoria Group shows that rent prices in the cities and towns in the Northern Powerhouse have risen by an average of 17%, with rental cash yields of nine per cent in Salford, and seven per cent in Liverpool and Bolton.

With a capital appreciation of five per cent, investors are looking at total yields between 12-14%, which is extremely attractive. The group said if geared, the returns could be between 20% to as high as 35%.

The resilient property market in the North West is helped by the highly-successful regeneration of the area which has brought new jobs, transport links and a range of large housing projects, proving the strength of the economy as a whole in the region.

According to Mish Liyanage, managing director of The Mistoria Group, there is growing demand for high-end HMO (homes of multiple occupancy) accommodation among young professionals and students across the Salford, Bolton, Manchester and Liverpool areas

He said: “BTL (buy to let) investors can buy a luxury HMOs in the North West from £120k upwards. The return on investment is very attractive, too, with an average 13% yield (eight per cent cash rental and five per cent capital growth).”

By Neil Hodgson

Source: The Business Desk

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Ringley: Now is the time to invest in BTL properties

Rental housing is likely to prove more resilient during this downturn than other real estate sectors, and landlords should therefore use this opportunity to invest in buy-to-let (BTL) properties, according to residential property consultancy Ringley Group.

Mary-Anne Bowring (pictured), managing director at Ringley Group, as said that people are more likely to rent than buy during a recession, and rent is typically one of the last things people stop paying during financial hardship.

Bowring said: “There is a huge opportunity still for buy-to-let investors in the UK rental market, which is only predicted to grow in size.

“That’s why institutional investors such as pension funds and insurers are investing billions in building homes for rent, as they see an opportunity to secure income-producing investments that hold up well during a downturn.”

Once the current crisis passes, pre-lockdown trends, including the predicted rise in the number of renters, will also continue.

This is due to affordability, changes in lifestyle and the job market, fundamentals which will remain post-virus.

To stimulate housing market activity and help landlords invest in BTL properties, Ringley has called for the government to exempt landlords from the stamp duty surcharge on second homes.

Bowring said: “Government efforts to restart the housing market should reflect long term pre-existing trends and that includes the continued growth in private renting.

“If the government wants to kill two birds with one stone – boost activity in the housing market and provide much needed rental homes – it should exempt landlords from the second home stamp duty surcharge immediately.”

In response to the growing demand for rental properties, as well as the effects of the COVID-19 lockdown, Ringley recently brought forward the launch of its automated lettings platform, PlanetRent.

Bowring said: “Proptech is evolving lettings fast as tenants must be seen as customers and the expectation is a frictionless, fully loaded experience, including immediate service which automation allows.

“It is important that buy-to-let landlords learn from institutional landlords to not fall behind the latest trends.”

By Jessica Bird

Source: Mortgage Introducer

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Average rental yield sees marginal decline compared to pre-pandemic levels

Average UK rental yield currently sits at 3.5%, a marginal decline from the 3.6% registered prior to the COVID-19 pandemic, according to research by lettings management platform Howsy.

Even with the obstacles facing the current market, there are still buy-to-let (BTL) pockets providing strong returns for landlords.

Bradford has the highest average yield at 10%, with Gwynedd (6.2%) and North Down (6%) following behind.

Other areas that rank highly are Glasgow, Liverpool, Preston, West Dunbartonshire, North Lanarkshire, Forest Heath and Manchester.

At the other end of the scale, Malvern Hills, Kensington and Chelsea and Chiltern have the worst average yields at 2.3%.

The largest increase in average yields has been in North West Leicestershire, up 1.4% during the pandemic.

Arun, Corby and West Norfolk have also seen increases of 0.8%, while North Dorest and Newark and Sherwood have had an uplift of 0.7%.

Kettering, Derby, Breckland and Falkirk are also among the top 10 for largest rental yield uplifts during the pandemic.

Rhondda Cynon Taf, York, Gedling, Chiltern and the Vale of Glamorgan, however, have seen the largest declines, between 1% and 3.5%.

Calum Brannan, founder and CEO of Howsy, said: “The current lockdown has seen the government introduce measures such as buy-to-let mortgage holidays and a ban on tenant evictions and this has understandably caused many buy-to-let investors to hesitate.

“But despite this overall air of market uncertainty, tenants still need to find rental properties and so it continues to be business as usual for many landlords and those agents who have adapted to a more digital mode of operations.

“There’s also still a large number of areas where potential and existing landlords can secure favourable yields much higher than the national average, with some areas still seeing an uplift in yields despite the spread of the coronavirus.

“As the nationwide lockdown continues to drag on, there may be another silver lining for buy-to-let investors.

“Should the property market see prices fall, the cost of investing will be lower, boosting profit margins in a sector that has had it tough of late due to government squeezes on profitability.”

By Jessica Bird

Source: Mortgage Introducer

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More than 85% of BTL lenders are allowing landlords to remortgage

Mortgage for Business says there are still 42 lenders in the buy-to-let remortgage market, a fall of seven (14%) since the Covid-19 epidemic took hold.

Steve Olejnik, managing director of Mortgages for Business, said: “While HSBC has recently announced it is no longer able to accept applications for buy-to-let mortgages, other lenders are out there.

“We’ve seen lenders like Together Money and Vida Homeloans temporarily pull out of the market – but more than 85% of the lenders that landlords rely on are still trying to do their bit – as are we.

“Four of the lenders that initially withdrew their BTL mortgages – Santander, Clydesdale, Precise Mortgages and Kent Reliance – are now lending again.

“There is no need for landlords to panic. Yes, landlords looking to remortgage have fewer options. But they still have plenty.”

Saffron Building Society withdrew from the market before the outbreak in March – for non-Covid-19 reasons – and has indicated its intention to return ‘later in the year’.

Lenders that stopped lending to landlords since the outbreak, and remain withdrawn from the BTL market, include HSBC, Foundation Home Loans, Together Money, Vida Home Loans, Platform Home Loans, State Bank of India and Furness Building Society.

Olejnik commented: “Lots of lenders have cut down the sorts of landlords that they will lend to. They’re pulling product ranges, tightening lending criteria and increasing margins.

“But different lenders are derisking against different kinds of landlord borrowers. So, while some lenders are no longer lending to first time landlords, there are still lenders who are.

“A huge number of 80% LTV five-year fixed rate BTL products have been pulled from the market – about 90% of them. But not all.”

Number of lenders in BTL remortgage market

Type of BTL RemortgageMarch 2020April 2020Change
First-time landlords4735-26%
Portfolio landlords4033-18%
Ltd company landlords3024-20%
Student lettings3021-30%
HMOs2715-44%
BTL tracker loans2816-43%
85% LTV BTL loans30-100%
Active BTL lenders4942-14%

Valuations

Olejnik added: “With valuers banned from visiting homes, landlords are finding remortgaging harder than it was. But there are lenders offering mortgages using automated valuations, rather than physical valuations, and a lot of our landlord clients are taking advantage of this.

“The landlord community is benefitting from Shawbrook and Paragon, in particular, who are using virtual valuations for loans against standard properties up to 75% of loan to value. They’re being very helpful.

“Even lenders who require a physical valuation at a higher LTV are generally processing landlords’ remortgage applications as normal – but moving the valuation part of the application to the very end. A significant percentage of our landlord clients are happy to do this. They’re content to sit back and wait out the lockdown and get a physical valuation done.”

Product numbers

While the number of lenders operating in the market has fallen only marginally, there has been a significant fall in buy-to-let mortgage deals since the start of March 2020– with the number of BTL products dropping by almost 50%.

Olejnik concluded: “The number of products has dropped but the only section of the market that’s genuinely gummed up is 85% LTV lending – and that’s pretty niche. There were only three lenders doing business at that end of the market when the Boris Bounce was in full swing.”

By Joanne Atkin

Source: Mortgage Finance Gazette