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NRLA: Demand for rental properties reaches five year high

The demand for private rented housing has reached a five-year high, according to research released by the National Residential Landlords Association (NRLA).

The survey of private landlords across England and Wales, conducted in partnership with research consultancy BVA/BDRC, found that 39% confirmed demand for homes to rent had increased in the second quarter of 2021 – 8% more than said so in the first quarter of the year.

In Yorkshire and the Humber, Wales, the South West and the South East more than 60% of landlords said that demand for homes to rent had increased.

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In contrast, just 15% of landlords in central London said demand had increased in the second quarter of the year, compared with 53% who said it had fallen.

Despite an overall increase in demand, the proportion of landlords intending to buy property has fallen from the four year high of 19% recorded in the first quarter of the year, to 14%.

In comparison, the proportion looking to divest has returned to 20%, up three percentage points from the first quarter of the year.

As COVID-19 restrictions are lifted, 55% of landlords said that their lettings business will continue to be negatively impacted as a result of the pandemic.

An estimated 81% of those in outer London and 78% of those in central London said they would be negatively impacted.

At the other end of the spectrum, 49% of those in Yorkshire and the Humber said they would be negatively affected.

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Chris Norris, policy director for the NRLA, said: “The evidence is clear that nationally whilst the demand for homes to rent is increasing, landlords are more reluctant to invest in new properties.

“The only losers will be tenants as they struggle to find the homes to rent they need.

“The Chancellor needs to recognise the harm being done by tax hikes imposed on the sector.

“It is clear that there is a significant flight of tenants from the capital in response to the COVID pandemic.

“With lockdown restrictions having ended, and offices beginning to reopen, the jury is out as to whether this trend will continue.”

By Jake Carter

Source: Mortgage Introducer

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Where are buy-to-let landlords the most confident about sector prospects?

Confidence among buy-to-let landlords is increasing nationally, but there are certain areas where landlords are particularly confident about sector prospects with increasing demand and shorter void periods.

Every quarter the National Residential Landlords Association (NRLA) undertakes a survey asking landlords if they are feeling more or less confident about achieving their goals compared to the previous quarter.

National landlord confidence has grown for the third consecutive quarter. Confidence is also at the highest level recorded in the 10 quarters the index has been running. This is the most sustained trend seen for landlord confidence in the buy-to-let sector.

In the past year, 15% of buy-to-let landlords surveyed have purchased property. Those who have bought cited anticipated changes in economic conditions as the most influential factor in their property portfolio decisions. Landlords who have bought recently appear to be particularly optimistic about the future.

Recently, there has been a pattern of a growing proportion of buy-to-let landlords planning to purchase additional properties. The proportion of landlords planning to buy in the next year is 50% higher than in the first quarter of 2020 with 22% of landlords. This is the fifth quarter in a row where this has increased. Additionally, it’s the highest figure recorded since this survey first began.

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Areas with the most and least confident landlords

A number of regions are seeing landlord confidence above the national average. Yorkshire and the Humber leads the way with landlords the most confident there. The West Midlands, north-west, south-west, east of England and East Midlands all came in above the national average of landlord confidence.

Although confidence among landlords has generally increased, the north-east, south-east and East Midlands saw a downturn in confidence compared to the previous quarter. Inner London is where landlords are the least confident throughout England and Wales. And the north-east, London, Wales, Outer London and the south-east also see landlord confidence below the national average.

Increasing tenant demand

The survey by NRLA has revealed landlords have seen an increase in tenant demand for the second quarter in a row. When asked about their perception of demand in their area, more buy-to-let landlords stated they have noted an increase than a decrease.

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The net score from that is the highest NRLA has seen since the association began recording demand in the second quarter of 2019. This score has also grown by nearly 10 percentage points since the previous quarter.

Shorter void periods

On a national level, 67% of vacant properties remain empty for less than four weeks. This is a five percent increase on the previous quarter. It’s also almost as high as pre-pandemic numbers, when this figure stood at 68%.

This shows that the majority of landlords’ properties are being turned over and filled increasingly quickly. These shorter void periods is likely due to the strong demand and need for more housing across England and Wales.

With increasing demand and shorter void periods in the private rented sector, landlords confidence could grow further. This could then lead to more investors expanding their portfolios in the next quarter.

By Kaylene Isherwood

Source: Buy Association

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UK buy-to-let has ‘defied gravity’ through Covid-19, says S&P

The UK buy-to-let (BTL) market remained resilient through the Covid-19 pandemic and has features that could help it remain buoyant, says S&P Global Ratings in a new report.

Amid the pandemic-related lockdowns, private sector UK rental arrears reached 9.0 per cent by the end of 2020, but the S&P RMBS post-2014 originations buy-to-let (BTL) index recorded total delinquencies no higher than 0.5 per cent.

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“Diversification in terms of property and borrowers, the increasingly professional nature of BTL, and generally high debt servicing ratios has helped buy-to-let performance remain resilient,” says S&P Global Ratings credit analyst Alastair Bigley.

For post-2014 originations, approximately 50 per cent of properties at a portfolio level could be in rental arrears in the short term before it would affect debt service and cause a significant spike in arrears.

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Ultimately, Covid-19 represented a shock to only one risk factor that determines BTL performance – tenant affordability – while other factors such as the prevailing interest rate environment and house prices were supportive.

“Looking forward, although peak stress for landlords may be argued to be over, the recent prominence of 95 per cent owner-occupied lending may facilitate some renters to become buyers and change the supply-and-demand dynamics for certain properties, and make some properties harder to rent,” says Bigley.

Source: Property Funds World

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Buy-to-let remortgaging is on the up

As we emerge out of the latest Covid lockdown we are seeing an increase in interest around remortgaging in the buy-to-let market.

BTL is a buoyant sector, you only have to look at the number of lenders who specialise in it as a well as most mainstream lenders. There is certainly choice for borrowers and rates are competitive.

The BTL sector has increased every year from 2009 to 2019, representing a decade of growth following the global financial crisis.

In 2008 there were 114,740 BTL remortgages but in 2009 cases fell sharply to 32,850 as a result of the GFC. In monetary terms the drop off was £14.61bn down to £3.39bn in 2009.

The figures from UK Finance show how the BTL market has grown since then and in 2019 remortgaging peaked at 187,900 loans with a value of £31.1bn.

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Then the Covid pandemic came along and led to a fall in all lending with BTL remortgaging numbers going down to 163,300 in 2020 and a subsequent fall in value to £27bn.

But we are seeing a pick-up now with Q1 2021 rising compared to the previous quarter as 39,700 loans were issued at a value of £6.9bn.

Remortgaging for equity

These figures resonate with us as we are also seeing a rise in remortgaging especially for people wanting to take out more equity.

Talking to our underwriters, most borrowers want to use the extra money for further property investment. I would say this applies to around 70% of our landlord customers. A large chunk of our mortgage book is portfolio landlords, but it is also smaller landlords who are wanting to grow their investment property business.

There is a combination of factors here as to why that is. The stamp duty holiday has had an influence on landlords buying more property as there has been less tax to pay. Some landlords brought their buying plans forward to take advantage of the tax break.

Another influential factor is that house prices have been rising, therefore LTVs are lower, and more equity can be taken out. Coupled with the fact that many five-year fixes maturing this year, we expect remortgaging to continue an upward trajectory going forward.

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Home improvements

The other reason for borrowers taking out equity on their remortgage is for home improvements, and this applies to around 20% of our customer base. Some are using void periods to spruce up their properties, others are making repairs, but a newer reason has been to make properties more energy efficient.

Since 2018 all rental properties must have an Energy Performance Certificate (EPC) rating of at least E, but the government has its sights on all homes being rated C or above by 2030.

Astute landlords have been making improvements with changes such as cavity wall and loft insulation and installing new condensing boilers. But others are going further by replacing windows with double or triple window glazing and even installing solar panels.

We expect more landlords will want to improve their EPC ratings and quite a few lenders now are offering green mortgages as an incentive for them to do this, including ourselves. In our case, discounted rates are given for properties with EPC ratings of A, B or C.

By Paul Brett

Source: Mortgage Strategy

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Confidence in buy-to-let business continues to grow among brokers

In Q2 2021, the proportion of brokers forecasting a rise in buy-to-let mortgage business over the next 12 months has increased.

Despite the tapering of the stamp duty holiday, a survey by Paragon reveals 53% of mortgage brokers expect buy-to-let business to increase over the next year. This is compared to 50% in the first quarter of 2021. At the same time, the proportion of brokers forecasting declining levels of business stayed consistent at 10%.

Moray Hulme says: “These figures suggest that the strong levels of buy-to-let business witnessed over the last six to nine months wasn’t just as a result of the Stamp Duty stimulus, but down to more fundamental shifts in where and how people want to live.”

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Buy-to-let demand is high

During the second quarter of 2021, brokers reported that demand for buy-to-let was high. Specifically, 42% of intermediaries said demand was “strong”. And 8% stated demand was “very strong”. In the second quarter of 2020, which was at the height of the pandemic, there were only 26% who felt this way.

Additionally, only 10% of those surveyed reported buy-to-let demand to be weak. That is compared to 30% during the corresponding quarter last year.

Overall, the confidence among brokers is generally high. In the survey, 91% said they were confident about the outlook for their business over the next year. This was especially prevalent for those seeing high levels of buy-to-let business with 97% among that cohort.

“There has certainly been a growth in tenant demand for family homes, for example, and landlords are reacting accordingly.”

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Investing in buy-to-let

With demand in the private rented sector at high levels across the UK, this is providing a boost to the buy-to-let sector. Recently, many landlords have seen a drop in void periods and higher yields.

Additionally, the number of buy-to-let mortgages reached the highest level since March 2020. Investors and landlords have been welcoming the additional choice. With the increased competition, interest rates are still historically low.

Many landlords are locking in competitive mortgage deals. This is leading more buy-to-let investors to expand their property portfolio. Additionally, this year, more first-time landlords have even entered the buy-to-let sector due to the enticing market conditions.

By Kaylene Isherwood

Source: Buy Association

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Broker buy-to-let confidence continues to increase

Some 53% of mortgage intermediaries expect to see an increase in buy-to-let business over the next 12 months despite the tapering of the stamp duty holiday, according to research from , Paragon Bank.

This figure, which covers the second quarter of 2021, compares to 50% in the first quarter of the year, whilst the proportion expecting declining levels of buy-to-let business remained consistent at 10%.

Moray Hulme said: “These figures suggest that the strong levels of buy-to-let business witnessed over the last six to nine months wasn’t just as a result of the Stamp Duty stimulus, but down to more fundamental shifts in where and how people want to live.

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“We still expect to see business levels moderate as the stamp duty holiday ends but landlords are seeing plenty of opportunities to expand their portfolios to meet excellent levels of tenant demand and changes in the type of property people now want to rent.

“There has certainly been a growth in tenant demand for family homes, for example, and landlords are reacting accordingly.”

Brokers also reported that demand for buy-to-let was strong during the quarter itself, with 42% of intermediaries stating demand was ‘strong’ and 8% ‘very strong’.

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That compares to 26% in the corresponding period last year at the height of the pandemic.

Just 10% of respondents reported buy-to-let demand as weak during the period, compared with 30% during the second quarter of 2020.

Moray Hulme added: “Mortgage brokers have experienced a busy 12 months after the initial panic of the coronavirus pandemic.

“They enter the second half of 2021 in a confident, robust mood, which is indicative of the underlying demand for mortgage products.”

Source: Mortgage Introducer

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Energy efficiency has become a top priority for buy-to-let investors

When making investment decisions, many buy-to-let investors are considering green credentials of properties, alongside rental yields and opportunity for capital growth.

New research by Hodge reveals buy-to-let investors are starting to put more importance on the energy efficiency of properties. In a survey of landlords, investors and brokers, 82% of respondents said environmental friendliness and energy efficiency were a top consideration when purchasing properties.

Green credentials even made it in the top three considerations when making decisions on property investments, along with the opportunity for capital growth and rental yields. Hodge also pointed out that other recent research is indicating that people are prioritising living more sustainable lives.

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A Savills report revealed 26% of people consider the environment the most important issue facing the country. Additionally, research by Opinium showed 78% of the public feel they have a personal responsibility to deal with the climate crisis. Many of the people included in this research will be renters, showing the need for more eco-friendly properties.

Property priorities are changing

To stay competitive, buy-to-let investors need to adapt to these tenant preferences and the changing market. Investors, along with property developers, will need to provide more choice in sustainable housing options moving forward. And it’s positive to see investors are already prioritising green credentials.

Andy Button, head of investment finance at Hodge, says: “The buy-to-let market is particularly buoyant right now with demand continuing to grow throughout the pandemic, and it’s interesting to see how the priorities for landlords are changing when looking to add to their portfolio.

New-builds in high demand

The government has a target to reduce greenhouse gas emissions to net zero by 2050. Improving the energy efficiency of housing will play an important part in achieving this. There is even talk that the government could further increase minimum EPC ratings for properties in the private rented sector in the coming years. Currently, all privately rented properties need to achieve a grade E or higher.

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With the latest environmental standards, new-builds are greener properties. The majority of new-build properties have an A or B EPC rating. Higher green standards are even being introduced. This will further lower energy consumption and reduce bills for occupiers.

New-builds are more appealing to tenants compared to old, tired properties. The high environmental standards and lower bills provide benefits to tenants. This makes energy efficient new-builds ideal for buy-to-let investment. Because of this, good quality new-builds are becoming increasingly sought after.

Andy adds: “It’s clear that sustainability will feature more and more in new build development design, and more stringent compliance to EPC, and an investment strategy more closely aligned to sustainability could actually improve cash flows in the longer term, as tenants might be prepared to pay higher rents, in exchange for lower utility costs.

By Kaylene Isherwood

Source: Buy Association

Source: Mortgage Introducer

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Portfolio landlords prefer to trust brokers to find the best loan

The majority (73%) of buy-to-let (BTL) landlords prefer to access finance through a broker, rather than going directly to lenders, according to Hodge research.

The research, which asked portfolio BTL landlords and brokers for their views, also found that 71% of larger investors (with portfolios of between £2m and £50m) specified that a broker had saved them money by getting them a good deal.

In addition, 40% of BTL landlords said they found researching a suitable mortgage product themselves to be frustrating, with annoyances including interest rates (35%), lack of clarity over charges (35%), and mortgage or loan underwriting (31%).

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Mike Clifford, head of commercial propositions at Hodge, said: “Our research shows borrowers clearly value the support of a broker to find them the best deal and trust them to find a lender that suits their needs.

“With so many borrowers putting their trust in brokers to find them a loan that suits them, brokers are seen as a key link between lenders and investors – with the added benefit of removing frustrations for landlords.

“The residential market is still very buoyant and many buy-to-let landlords are on the look-out for new properties to add to their portfolio.

“When it comes to lenders they want flexibility, speed and efficiency, something we strive to achieve here at Hodge.

“Hodge has a small, specialist residential investment team who aim to provide a bespoke and flexible service to both brokers and investors.

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“Getting to know our customers, listening to their feedback and keeping them in the loop when it comes to criteria changes and product enhancements allows us offer greater flexibility and match the right product to the right investor.

“The Hodge portfolio buy-to-let loan allows landlords to control their assets under one loan, with the flexibility to remove and add properties, ensuring a far more streamlined, flexible product, which, according to our research, is just want landlords – and brokers – are looking for.”

By Jake Carter

Source: Mortgage Introducer

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Plenty of choice for landlords as buy-to-let options increase

Buy-to-let product choice has increased whilst average two and five-year fixed rates have fallen, according to the latest analysis from Moneyfacts.co.uk.

New figures revealed the average two-year fixed rate was lower now than compared to 2019.

Meanwhile, the beginning of July saw the highest number of product options on offer in the buy-to-let space.

The 2,709 deals on the market at the start of this month represented a 971 leap on this time last year when availability was limited following the product withdrawals which took place during the pandemic.

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Moneyfacts said, landlords with 40% equity or deposit would find, even though their level of product choice was lower than this time last year, they were amongst those who might be able to secure a competitive new deal as the average two and five-year fixed rates in this bracket both remained 0.03% lower year-on-year.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said there were also 365 deals more available now than were recorded in July 2019, demonstrating the strength and resilience of the sector in the aftermath of an unprecedented 18 months.

“The demand for buy-to-let could well remain strong in the months to come as rental demand is prevalent, indicated by recent research from Propertymark’s Private Rented Sector report, May saw a record-breaking number of new prospective tenants registered,” she added.

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“Whether now is the right time to invest in property may also come down to the desire to earn a decent income.

“Indeed, research from Nottingham Building Society revealed that 61% of landlords surveyed felt property was a better investment due to low interest rates for savings – and this coupled with high demand for rental accommodation could sway new investors to dive into the buy-to-let sector.”

Williams also explained, due to the influence of the pandemic, interest rates for buy-to-let had climbed year-on-year with the overall two and five-year average interest rates of 2.98% and 3.28% being 0.37% and 0.31% higher respectively than a year ago.

This, she said, may be linked to the increase in availability of higher loan-to-value products.

She added: “These higher LTV deals usually charge a higher rate and can therefore impact these averages. However, despite creeping up a further 0.02% month-on-month, what is positive is the fact that the overall two-year fixed rate is lower now than in June 2019 – which means those coming off a two-year fixed deal may still find a better deal, depending on how much they have in equity and their circumstances.

“There could still be some understandable hesitation from prospective landlords with some existing investors who could even be considering downsizing their portfolio depending on the pandemic’s impact. However, we are beginning to see some improvements in average rates in certain loan-to-value brackets on a month-on-month basis.

“As house prices rise, demand for rental accommodation is high, and savings rates remain poor, therefore, investing in property could be enticing to some. It is vital though that would-be landlords and those looking to change their deal seek advice to ensure it’s the right time for them and they find the best package for their circumstances and plans.”

Buy-to-let mortgage market analysis 
Product numbersJul-19Jul-20Jun-21Jul-21 
BTL product count – fixed and variable rates2,3441,7382,4862,709 
All 80% LTV BTL products – fixed and variable rates21277147198 
All 75% LTV BTL products – fixed and variable rates971616884952 
All 60% LTV BTL products – fixed and variable rates342414341340 
Average ratesJul-19Jul-20Jun-21Jul-21 
BTL two-year fixed – all LTVs3.01%2.61%2.96%2.98% 
BTL two-year fixed – 80% LTV3.75%3.18%4.20%3.94% 
BTL two-year fixed – 75% LTV3.02%2.72%3.01%3.01% 
BTL two-year fixed – 60% LTV2.07%2.28%2.28%2.25% 
BTL five-year fixed – all LTVs3.50%2.97%3.31%3.28% 
BTL five-year fixed – 80% LTV4.14%3.82%4.34%4.15% 
BTL five-year fixed – 75% LTV3.51%3.14%3.42%3.36% 
BTL five-year fixed – 60% LTV2.51%2.65%2.64%2.62% 
Data shown is as at first working day of month, unless otherwise stated.  Source: Moneyfacts.co.uk

Source: Mortgage Finance Gazette

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Buy-to-let landlords rate energy efficiency of properties as top priority

The green credentials of prospective properties have been rated among the top consideration for portfolio buy-to-let landlords, a survey by Hodge has found.

The bank discovered environmental friendliness and energy efficiency were up there with rental yield and opportunity for capital growth as the top investment priorities when it quizzed landlords, investors and brokers.

Indeed, it was important for 82% of respondents demonstrating how influential green credentials were for landlords today.

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Andy Button, head of investment finance at Hodge, said: “The buy-to-let market is particularly buoyant right now with demand continuing to grow throughout the pandemic, and it’s interesting to see how the priorities for landlords are changing when looking to add to their portfolio.

“While rental yield and potential for capital growth are, of course, top priorities our research reflects a change in mood of the market, where sustainability and green credentials are becoming ever more important.”

“According to a recent Savills report, 26% of people considered the environment the most important issue facing the country and, according to Opinium research, 78% of the public believe they have a personal responsibility to deal with the climate crisis – many of these people will be renters.

“Therefore, to stay competitive landlords can’t ignore tenant preference; they, along with developers and estate agents, are having to provide choice in sustainable housing options.”

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Button added: “It’s clear that sustainability will feature more and more in new build development design, and more stringent compliance to EPC, and an investment strategy more closely aligned to sustainability could actually improve cash flows in the longer term, as tenants might be prepared to pay higher rents, in exchange for lower utility costs.

“Our research suggests that investors are very much alive to the longer term benefits that having sustainability credentials in a portfolio can afford.”

Hodge’s PBTL product has been developed for buy to let landlords with four or more properties, who want to stay organised with one loan to cover them all. It offers mortgages of up to £5 million for between four and 15 properties and will also loan to those buying multi-unit blocks.

The lender also offers a Specialised Residential Investment loan, up to £10 million, for larger investors with over 15 properties/units, and includes specialist property types, like multi-unit blocks and Houses of Multiple Occupancy.

Source: Mortgage Finance Gazette

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