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Buy-to-let benefits from increased choice and competitive rates

Landlords are benefiting from an increased choice of buy-to-let products as more mortgages return to the market following the dip caused by the pandemic.

Data from Moneyfacts.co.uk showed, having plunged to a total of 1,455 products in May, the buy-to-let mortgage market has received a boost of 283 more products as lenders increase their ranges.

The two-year fixed rate market now has 134 more products and there are an additional 164 options in the five-year fixed rate sector than compared to the start of May.

However, things are still not as buoyant as they were before the Covid-19 crisis began in March, when there were 2,897 buy-to-let mortgages available.

Eleanor Williams, finance expert at Moneyfacts, said its latest research revealed the buy-to-let sector had adapted well to conditions caused by the pandemic and there were indications landlords may have cause for positivity.

“The latest Rental Index research from lettings platform Goodlord indicates that in June, new tenancy applications remained at 90% above 2019 levels,” Williams added.

“Subsequently, they have recorded increases in rental costs and also void periods reducing, as tenant demand for new properties remains strong now that the market has reopened.

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“This news should be a boost to landlords, who after a difficult few months can see that choice is beginning to return to their sector.”

Vote of confidence

Kevin Roberts, director, Legal & General Mortgage Club said the news more choice was returning to the market was a vote of confidence in the buy-to-let sector and a sure sign that it remained open for business.

He added: “At Legal & General Mortgage Club, our data even shows that despite the pandemic landlords still have a positive view of the buy-to-let sector.

“Nearly three in every five landlords (57%) told us that the crisis has had no impact on their plans to stay in the market and more than one in ten (16%) even have plans to buy more property over the coming months.”

Competitive rates

Moneyfacts data also showed rates were currently competitive, especially when compared to January.

The average rate for two-year fixed rate mortgages on 1 July was 0.21% less than at the start of the year, while the five-year fixed rate has fallen by 0.22% over the same time period.

Buy-to-let mortgage market analysis
Product numbersJan-20Mar-20Apr-20May-20Jul-20
BTL product count – fixed and variable rates2,5832,8971,8871,4551,738
Two-year fixed rates BTL – all LTVs823914610491625
Two-year fixed rates BTL – 80% LTV11914157931
Two-year fixed rates BTL – 60% LTV126124129148144
Five-year fixed rates BTL – all LTVs8791,000695480644
Five-year fixed rates BTL – 80% LTV11015069619
Five-year fixed rates BTL – 60% LTV128133140155146
Average RatesJan-20Mar-20Apr-20May-20Jul-20
BTL two-year fixed – all LTVs2.82%2.77%2.71%2.51%2.61%
 BTL two-year fixed – 80% LTV3.64%3.56%3.80%3.61%3.18%
 BTL two-year fixed – 60% LTV1.92%1.89%2.24%2.39%2.28%
BTL five-year fixed – all LTVs3.19%3.24%3.16%2.94%2.97%
 BTL five-year fixed – 80% LTV4.03%3.98%4.18%4.32%3.82%
 BTL five-year fixed – 60% LTV2.32%2.31%2.62%2.76%2.65%
Data shown is as at first working day of month, unless otherwise stated. Source: Moneyfacts.co.uk

By Kate Saines

Source: Mortgage Finance Gazette

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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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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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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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85% of buy-to-let lenders still lending

Some 42 of the 49 buy-to-let lenders operating at the beginning of March are still lending despite the impact of coronavirus, analysis from Mortgages for Business shows.

Together Money and Vida Homeloans have both pulled out of the market, while HSBC is no longer accepting buy-to-let applications.

However Santander, Clydesdale, Precise Mortgages and Kent Reliance have now restarted lending, after initially taking a step back.

Shawbrook and Paragon meanwhile are using virtual valuations against standard properties up to 75% loan-to-value.

Steve Olejnik, managing director of Mortgages for Business said: “Lenders have cut down the sorts of landlords that they will lend to.

“They’re pulling product ranges, tighten 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.

“My advice to landlords looking to remortgage is act sooner, rather than later. You may have to answer a few more questions when you’re applying for a remortgage that you would have had to last month – but a broker will still be able to find you a deal.”

Saffron Building Society withdrew from the market before the outbreak in March, though the lender has indicated that it will return to the market later in the year.

Lenders that have stopped lending to landlords since include: HSBC; Foundation Home Loans; Together Money; Vida Home Loans; Platform Home Loans; State Bank of India; and Furness Building Society.

BY RYAN BEMBRIDGE

Source: Property Wire

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Best Current UK Property Investment Locations

New research claims to reveal the best current UK property investment locations for buy to let investors to enjoy the greatest returns.

The research, carried out by peer to peer lending platform Sourced Capital, shows that over the last five years, investment into the real estate, renting and business sector has increased by 48.4 per cent, one of the largest increases in the non-manufacturing industries behind just the ‘construction’ and ‘other service’ sectors in terms of performance.

Despite Brexit uncertainty hitting house price growth, coupled with changes to tax regulations and a hike in stamp duty thresholds for buy to let landlords, the UK property market has stood firm and remains one of the most consistent investment options available in today’s markets.

Nationally and Regionally

The nation offering the best current top-line yields is Scotland at 5.8 per cent, closely followed by Northern Ireland at 5.4 per cent, with England also coming in just above the UK average (4.1 per cent).

Regionally, the North East (4.9 per cent), Yorkshire and the Humber (4.5 per cent) and the North West (4.4 per cent) are home to the most favourable current rental yields.

The best buy to let spots in the UK

Scotland’s current buy to let pedigree is also clear on a local level, with 14 of the top 20 areas for current yields located north of the border. 

Glasgow ranks top at present with yields hitting 7.8 per cent on average, followed by West Dunbartonshire (7.2 per cent) and Inverclyde (7.1 per cent). 

Burnley ranks at number six and the best in England with the average rental yield currently at 6.6 per cent, followed by Belfast (6.4 per cent).

Other areas outside of Scotland to make the top 20 include Blackpool (5.9 per cent), Country Durham (5.8 per cent), Pende (5.8 per cent) and Hyndburn (5.8 per cent).

In London, Tower Hamlets is currently home to the highest yields at 4.7 per cent, followed by neighbouring Newham (4.6 per cent) and Barking and Dagenham (4.6 per cent). 

Founder and Managing Director of Sourced Capital, Stephen Moss, commented: ‘One positive that can be taken from months of stagnant house price growth brought on by Brexit uncertainty is that rental yields have seen a boost due to a fall in property values coupled with consistently high rental demand and rental prices as a result.

‘We’ve already seen a Boris inspired bounce late last year with early signs that the market has ‘bottomed out’ and is once again on the up already in 2020. As a result, we’ve also seen an early flurry of investor activity as they realise now is a great time to get a foot in the door and secure a good deal before prices do regain momentum and the returns available start to tighten.’

Source: Residential Landlord

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Buy To Let Rental Yields Highest In The North

Buy to let rental yields have been shown to be highest in the North of England, according to a new buy to let index launched by Fleet Mortgages.

The new index found that buy to let rental yields in the north rose the most in the final quarter of 2019, as demand from prospective tenants continued to heavily outstrip supply in the region.

Buy to let rental yields in the north of England reached an average of 9.1 per cent in the fourth quarter of 2019, up from 6.5 per cent in the fourth quarter of 2018.

Landlords in Greater London also saw their buy to let rental yields grow over the same period, enjoying a raise of 0.3 per cent, from 4.8 per cent to 5.1 per cent, while property investors in the South West saw their buy to let rental yields remain steady at 5.5 per cent.

Overall yield growth for England and Wales as a whole rose 0.7 per cent, from 5.4 per cent to 6.1 per cent, according to the index.

The only region where landlords suffered a fall in buy to let rental yields was the North West where they dropped by 0.1 per cent but continue to offer a healthy average return of 7.4 per cent.

Distribution director at Fleet Mortgages, Steve Cox, commented: ‘Clearly, the market has shifted over the past 18-24 months as landlords get to grips with the increased costs that come with private rental sector activity, in particular the phased-in changes to mortgage interest tax relief for individual landlords.

‘Landlords now tend to look differently at their properties, with many converting single-tenancy properties into multi-tenant ones in order to secure better yields.’

He concluded: ‘These higher yields are needed in order meet those growing tax liabilities, but to also offset the increased cost of acquiring tenants and regulation. Examples of these changes include more properties being converted into self-contained flats rather than keeping the property as a larger family home.’

Source: Residential Landlord

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Most attractive cities for BTL landlords revealed

London and Manchester has been named by landlords as the most attractive cities to invest in buy-to-let (BTL) properties in 2020 according to Simply Business.

The research shows that the two cities were where landlords expect the BTL market to be most robust this year, with both receiving over a third of votes when asked which city represents the best investment opportunity.

Liverpool and Birmingham followed closely behind as BTL hotspots, with both cities securing 10% of the vote amongst landlords when considering where their next investment in 2020 lies.

Bea Montoya, chief operating officer at Simply Business, said: “Buy-to-let landlords are crucial to the UK economy, contributing a combined £16.1bn through pre-tax spending.

“The sector also now houses 20% of British households and has a huge presence up and down the country, so it’s wholly encouraging that landlords view a broad spread of regions as attractive areas to invest this year.

“London usually comes out on top for being the most expensive city to invest in property in the UK, but falling house prices are making it an attractive place to invest once again.

“We know a quarter of landlords are planning to sell at least one property this year, largely due to government reform and tax changes, so it’s reassuring to see that landlords are still eyeing up investment opportunities up and down the country.”

By Jessica Nangle

Source: Mortgage Introducer

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How landlords are tackling the biting tax changes

Landlord clients are tackling the tax and regulatory changes hitting their pockets by taking advantage of low mortgage rates, using limited company structures, opting for higher yielding properties and branching further afield, brokers have said.

The buy-to-let market grew rapidly after the financial crisis but has since taken a beating as a number of tax and regulatory changes have made the private rental sector a less lucrative option.

In fact more than a third of landlords are planning to sell at least part of their portfolio in 2020 as the changes continue to bite in a system “weighted against them”.

Accumulate Capital polled 750 investors in December and found 37 per cent of landlords were planning to sell one or more of their properties, with 61 per cent of them blaming increasing regulations and taxes.

How the rules changed:

An additional 3 per cent stamp duty surcharge, introduced in April 2016, was closely followed by the abolition of mortgage interest tax relief for landlords.

Landlords then took a further hit when a shake up of rules by the Prudential Regulation Authority meant buy-to-let borrowers were now subject to more stringent affordability testing.

The changes to mortgage relief have been phased into the system since April 2017, but by April 2020 landlords will be unable to deduct any of their mortgage expenses from taxable rental income.

Instead, they will receive a tax-credit based on 20 per cent (the current basic tax rate) of their mortgage interest payments.

Following the changes, landlords who were higher or additional-rate taxpayers would now only get refunds at the 20 per cent rate, rather than top rate of paid tax.

On top of this, landlords could also be forced into a higher tax bracket because they would need to declare the income that was used to pay the mortgage on their tax return.

The changes led many to predict the buy-to-let market would shrink in size leaving only ‘professional landlords’ able to make viable returns.

Of those keen to sell, 72 per cent thought the current tax and regulation measures were unfairly weight against them while 69 per cent said the costs of managing their portfolio had risen “considerably” over the past five years.

But brokers have said many of their landlord clients were sticking with the private rental sector and diversifying their portfolio or shaking up their own system to deal with changes.

David Hollingworth, associate director of communications at L&C Mortgages, said: “[The changes] will no doubt lead some to hold their position rather than add more properties, particularly the more amateur landlord whilst they review their approach.

“However, many are taking action in controlling their costs by taking advantage of low mortgage rates and the use of limited company lending to grow investments.”

Due to the tax shake up, limited company status is more attractive to landlords as changes would not affect them and they can offset mortgage interest against profits which are subject to corporation tax instead of income tax rates, which is cheaper.

Average mortgage rates have also been slashed over the past few years as lenders battle in a “race to the bottom” which has seen two-year fixed rates for buy-to-let properties fall below 1.3 per cent.

Mr Hollingworth added: “While some will be considering whether it might be the right time to sell certain properties in light of the tougher conditions, there’s little to suggest that landlords are offloading property in significant numbers.”

Rachel Lummis, mortgage and protection adviser at Xpress Mortgages, said although buy-to-let enquiries from new and smaller landlords had plummeted, the larger portfolios were still transacting.

She said: “Larger portfolio landlords are still transacting, just differently from a few years ago.

“Clients are remortgaging existing properties to not only secure decent long-term fixed rates but to also raise capital for further investment.”

Ms Lummis said the properties being added to portfolios had moved from standard flats and houses to more high-yielding houses of multiple occupancy or multi-unit blocks, as well as in locations around the country not previously considered.

Meanwhile Ruth Whitehead, director at Ruth Whitehead Associates, warned against the “relative flatlining” of property values over the next few years and urged anyone considering selling property to “think very carefully”.

She added: “In short, it’s something that needs more careful consideration than ever before and clients should only stay in this market for the long haul.”

By Imogen Tew

Source: FT Adviser