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BTL mortgage cost decline slows

The fall in the cost of buy-to-let mortgages has slowed, online mortgage broker Property Master has found.

Property Master’s Mortgage Tracker for October showed costs dropped in four out of the six categories tracked but interest rates stayed the same for the remaining two categories.

Angus Stewart, chief executive at Property Master, said: “The previous quarter saw our report record two across the board falls in the cost of all the fixed rate buy-to-let mortgage categories we track.

“But as we go into the last quarter of this year, we have seen this decline stall – at least in the cost of 2-year fixed rates.

“The further reduction in some 5-year fixed rates provides some landlords with an incentive to fix their commitments at what may be the lowest rate we will see for some time.

“Lenders have been awash with funds recently which has been driving competition and lower mortgage costs.

“As ever the biggest influencer on interest rates going forward will be predicting the future strength of the UK economy which whilst Brexit remains unresolved is obviously very difficult indeed.

“It is unclear whether there will need to be a further fall in interests rates to stimulate the economy and this will be driven by whether or not we leave the EU at the end of this month and if we do whether or not it is with a deal.

“The Monetary Policy Committee meeting on 7 November will be a critical review point.”

The biggest fall in monthly cost was for 5-year fixed rate buy-to-let mortgage offers for 50% of the value of a property.

The monthly cost of this type of mortgage saw a monthly decline of £25.

By Michael Lloyd

Source: Mortgage Introducer

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Only 37% of BTL products available directly from lenders

Research from Paragon Bank shows that 57% of landlords are most likely to source their next buy-to-let mortgage from their existing broker, while 41% state they would be most likely to go direct to a lender for a buy-to-let mortgage. According to Moneyfacts.co.uk, currently 37% of buy-to-let mortgage products are available directly.

The research from Paragon Bank also revealed that there is little variance in the attitude towards retaining their current mortgage broker between portfolio and non-portfolio landlords, with 59% and 50% respectively saying they are most likely to remain with their current broker. (A portfolio landlord has four or more properties).

Landlords pausing on increasing their portfolios

Only 8% of landlords expect to purchase property in the next quarter, almost reaching the historic low of 6% in quarter four 2018. While those selling properties decreased by only one percentage point from 23% to 22%. In quarter three in 2014, the gap between landlords expecting to sell and those expecting to buy was equal, whereas the current gap now sits at 15%.

An area where portfolio and non-portfolio landlords differ is on the expectation of purchasing a property in the next quarter. Only 1% of non-portfolio landlords expect to purchase, while 10% of portfolio landlords expect to buy.

John Heron, director of mortgages at Paragon, said: “With so much change in the private rented sector (PRS) in recent years, landlords have had to adapt quickly to higher taxation, which has impacted returns on their portfolios. Throughout that time, landlords will have relied more heavily than ever on intermediaries to help them get the very best deals available. Therefore, it is no surprise that, while the future remains unpredictable, landlords are maintaining some stability by reusing the same brokers for their next mortgage.

“It’s surprising, however, to hear that some landlords are considering approaching a lender directly for their next mortgage. This does not match well with the actual behaviour of landlords, particularly in the portfolio segment where nine out of 10 landlords use an intermediary.”

Paragon Bank’s PRS Trends Report for quarter three 2019 was conducted with over 200 buy-to-let landlords, of which the large majority have been renting for over 10 years and are classed as professional landlords with three or more properties.

Source: Property118

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Fixed rate buy-to-let mortgage rates continue to fall

The biggest fall in monthly costs was for five year fixed rate buy-to-let mortgage offers for 50 per cent of the value of a property, the data from Property Master’s August report shows.

The report, which tracks the cost of mortgages from 18 of the largest buy to let lenders, found that the monthly cost of this type of mortgage fell by £13 per month July to August and five year fixed rates for 65 per cent of the value of a property fell month on month by £5.

However, five year fixed rates buy-to-let mortgage at 75 per cent of the value of a property was one of only two types tracked to show an increase, up £29 per month.

The report says that this may reflect the attractiveness of five year fixed rate products to landlords struggling to meet new affordability regulations.

The cost of two year fixed rate buy-to-let mortgages for 65 per cent of the value of a property fell by £2 per month and for 75 per cent of the value of a property by just £1.

Two year fixed rate buy-to-let mortgages for 50 per cent of the value of a property increased by £4 per month.

Angus Stewart, Property Master’s chief executive, said: “There have been a slew of rate cuts amongst lenders along with new offers being launched that are looking very attractive to landlords wanting to expand their portfolios or needing to remortgage.

“Good news on rates may well entice some landlords back into the market by helping them offset the many recent regulatory and tax costs they have been struggling to absorb.”

Source: Simple Landlords Insurance

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Rise in mortgage possession actions driven by one mystery lender

The number of homes repossessed by lenders in the second quarter of this year was up by 15% on the same period last year – while a rise in mortgage possession actions has been driven by just one large lender, whose identity has not been revealed.

Trade body UK Finance says that between April and the end of June 1,270 homes were taken into possession, but said the increase was driven by a backlog of historic cases.

It also said that the level was far below those seen between 2009 and 2014. In the first quarter of 2009, some 12,000 homes were repossessed.

UK Finance also reports that the number of home owner mortgages in arrears remains at historic lows.

There were 75,890 mortgages (0.84% of the total) in arrears of 2.5% or more in the second quarter.

Within that number, 23,370 were 10% or more in arrears.

The totals were respectively 2% and 3% lower than in the same quarter last year.

However, the number of buy-to-let mortgages in arrears has grown, with 4,660 in arrears of 2.5% or more – a total that is 5% greater than last year.

Within that, 1,200 buy-to-let mortgages were 10% or more in arrears, 12% higher than last year.

A total of 590 buy-to-let mortgaged properties were repossessed in the second quarter of this year, 2% up on the same quarter in 2018.

Separate figures from the Ministry of Justice, also covering the second quarter of this year, show an increase in possession actions – said to be “driven by one large mortgage provider”.

The lender is not named.

The MoJ statistics show that mortgage possession actions are up by 39%.

However, landlord possession actions are down.

The MoJ says there were 6,179 mortgage possession claims in the quarter – way down from 26,419 in the same quarter in 2009.

It currently takes an average of 36 weeks from claim to actual repossession.

In the rental sector, almost all landlord possession claims were by social landlords, with just 23% (6,079) by private landlords, although this was up by 2% from a year ago.

The average time for a private landlord to get from court claim to actual possession was 22.5 weeks, up from 21.6 weeks at the start of the year.

By ROSALIND RENSHAW

Source: Property Industry Eye

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More lenders are offering limited company buy-to-let mortgages

More than half (59%) of all buy-to-let mortgage lenders offered products to landlords who use limited companies as borrowing vehicles in Q2 2019, Mortgages for Business has found.

Its Buy to Let Mortgage Index showed the number of providers serving corporate buy-to-let borrowers has been growing steadily since the cut in mortgage tax relief was introduced.

Steve Olejnik (pictured), managing director of Mortgages for Business, said: “The Index points to some good news for landlords, particularly those using limited companies who now have a greater choice of lenders than ever before, to help them finance their rental properties and access to better rates.

“In particular, we’ve seen the options increase at the more specialist end of the market, and we’re delighted that the number of lenders in that space is growing.”

The restriction of income tax relief on mortgage interest has meant that limited companies can be a more tax and financially efficient method of operating property portfolios than the self-employed route which was used predominately by landlords in the past.

In addition, the findings are also reflected in the total value of buy-to-let mortgage applications completed in the quarter at Mortgages for Business.

By value, more than half (52%) were from landlords using limited companies.

Furthermore, the gap in pricing between the average buy-to-let mortgage rate (3.1%) and the average rate available to limited companies (3.7%) diminished by 0.02% when compared to Q1.

Lenders’ margins over the cost of funds fell slightly to 0.54% from an average of 0.55% in Q1 2019.

While this is not a huge cut, it demonstrates that lenders are really having to squeeze margins to remain competitive.

Low loan-to-value products fared the best, with margins dropping below the 0.5% mark (0.48%) for the first time since Mortgages for Business started tracking costs and fees back in 2013.

There was an increase in the proportion of fee-free and flat fee-based products, up to 20% and 38% respectively.

This was to the detriment of percentage-based fees which fell to 40% despite having peaked at 48% at the end of 2018.

Mortgages for Business said this is a positive outcome for borrowers, who tend to dislike percentage-based fees and another sign that lenders are vying for business in a challenging market.

Flat lender arrangement fees, sitting at £1,504, fell slightly quarter on quarter which bodes well for landlords in need of finance.

By Michael Lloyd

Source: Mortgage Introducer

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Unprecedented fall in buy-to-let fixed rates

Fixed rates in the buy-to-let mortgage space have fallen across the board, according to online mortgage broker, Property Master.

Angus Stewart, Property Master’s chief executive, described this as “unprecedented”, and follows on from recent remarks by the Governor of the Bank of England that the UK leaving the European Union without reaching some sort of trade agreement may well require some sort of economic stimulus such as a cut in rates to weather the shock of no deal.

He commented: “We have been tracking buy-to-let mortgage interest rates in this way for 18 months and we have never seen before a fall across the board in this way. It is quite unprecedented.

“Last month we were seeing a drift upwards in the cost of buy-to-let fixed rate mortgages but it may be that the market is now expecting rates generally to fall rather than rise.”

“It is likely that lower rates are also being fuelled by the continuing increase in the number of buy-to-let mortgage products. Whilst it is true some lenders have exited the market others are boosting their range and competing hard for new business.

“As landlords continue to be pressed on all sides by rising regulatory costs such as the new Tenant Fees Act and falling tax reliefs today’s news of a lowering of mortgage costs will be very much welcomed.”

Property Master’s July 2019 Mortgage Tracker shows the biggest fall in monthly cost was for five-year fixed rate buy-to-let mortgage offers for 75% of the value of a property. The monthly cost fell by £36 per month June to July.

Five-year fixed rates for 65% loan-to-value fell month on month by £6. Five-year fixed rates buy-to-let mortgage offers for 50% of the value of a property fell by just £3 per month.

Two-year fixed rate buy-to-let mortgages for 50% and 65% of the value of a property fell by £5 each. Two-year fixed rate buy-to-let mortgages for 75% of the value of a property fell by £8 per month.

The Property Master Mortgage Tracker follows a range of buy-to-let mortgages for an interest-only loan of £150,000. Deals from 18 of some of the biggest lenders in the buy-to-let market including Barclays, BM Solutions, RBS, The Mortgage Works, Godiva and Precise were tracked. Figures for this month’s Mortgage Tracker were calculated on deals available on July 1, 2019.

Property Master was launched almost two years ago and aims to shake up the buy-to-let mortgage market currently served by around 12,000 mortgage brokers. It has already attracted financial backing from a broad range of private investors including a minority stake being taken by LSL Property Services, whose estate and letting agency brands include Your Move and Reeds Rains.

Property Master has automated what was a manual, complex process to provide landlords with a free easy to use mortgage search tool which provides a mortgage quote that is pre-screened against each lender’s specific and changing criteria.

By Joanne Atkin

Source: Mortgage Finance Gazette

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Cost of BTL products dips

The average price of a buy-to-let mortgage has dropped over the past three months in a further sign that demand was drying up.

Latest data from Mortgage Brain’s quarterly analysis of the market showed the average cost of both tracker and fixed-rate buy-to-let products dropped and some experts have put the reduction down to providers trying to entice landlords in a difficult market.

For example, the analysis showed the cost of a 60 per cent loan-to-value two-year tracker mortgage dropped 3 per cent in Q2, while the same product at 70 per cent LTV now costs 2 per cent less than it did in March.

Landlords looking for fixed rates have also seen a decline in cost as the data showed a 2 per cent reduction in the cost of five-year fixed products.

The findings also showed a fall in cost of about 1 per cent for 60 per cent and 70 per cent LTV three year-fixed buy-to-let mortgages.

Although seemingly marginal, Mortgage Brain stated that a 3 per cent drop for a £150,000 mortgage at 60 per cent LTV could save a borrower upwards of £230 a year in a market where margins are slim.

Mark Lofthouse, chief executive of Mortgage Brain, said: “With new regulations, tax changes, and the potential for base rate rises coming into play, the buy-to-let landscape remains as complex as ever.

“While the mortgage cost movement over the past three months has been minimal, the majority of the movement has been favourable and with specialist advice and support from brokers, buy-to-let investors and potential landlords can continue to make the most of the low rates and costs in the buy-to-let market.”

Landlords have been subject to a number of regulatory changes in recent years, with the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016 shortly followed by cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules and the government has proposed abolishing the so-called ‘no fault’ Section 21 notices which give landlords the power to evict tenants at the end of their tenancy without a reason.

Back in January, the Intermediary Mortgage Lenders Association warned this year’s tax return would be the first time many landlords would see the effects of the changes on their earnings.

The data from Mortgage Brain also showed the difference in cost between residential and buy-to-let products, demonstrating the variation in risk between the two strands of mortgages.

The latest figures showed the cost of an 80 per cent five-year fixed product was 19 per cent higher than for its residential equivalent, while tracker products cost about 7 per cent more in the buy-to-let sphere.

Nick Morrey, product technical manager at John Charcol, said: “The difference between buy-to-let and residential products is interesting as it highlights the risk difference between the two.

“It would appear that the difference is highest for five-year fixed rates, which is a reflection of the need for them for landlords whose properties do not meet the affordability stress tests on other products and therefore effectively find themselves being able to only consider five-year fixed rates.”

According to Mr Morrey, this has created a “captive market” where lenders can levy a higher rate on five-year fixes and still sell the product as for some landlords it is the only option.

Mr Morrey added that the drop in costs for buy-to-let lending in general was not unexpected given the high level of competition in the area and the fact the market had seen some signs of declining demand due to changes to tax and regulation.

He said: “To grow or even maintain market share, lenders are shaving down their rates as much as they can and looking to tweak their criteria to cast a slightly wider net.”

By Imogen Tew

Source: FT Adviser

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Buy-to-let market offers opportunities for lenders

Judging by the newspaper headlines about the slowing housing market, the government’s buy-to-let (BTL) crackdown and the demise of the amateur landlord, you’d think there couldn’t be a worse time to enter the BTL lending market. But that’s exactly what we’re doing, and with good reason.

The BTL market may not be as buoyant as it was a few years ago, but it is still a very large market and is holding up well in the face of the government’s tax and regulatory changes. When you look at the facts, there are plenty of positive signs. Last year, the average market value of BTL landlords’ properties hit a record high and landlords are benefiting from strong growth in rents in many parts of the country. On the debt side, landlords are also able to choose from the broadest range of BTL lending products seen in the market since the financial crisis; and thanks to healthy competition between lenders and continued low interest rates, they are able to take advantage of low-cost financing deals.

While many of the small, highly geared landlords are struggling and starting to leave the sector, the number of large landlords with portfolios of half-a-dozen or more properties is actually increasing. These better capitalised, more professional landlords are best placed to adapt to changes in government policy. They also continue to see property as an attractive investment, offering good levels of return in a world where interest rates are unlikely to rise significantly any time soon. The market may be tough in London and the South East, where yields are at historically low levels and it is therefore difficult to generate the income returns needed to service a higher loan-to-value (LTV) loan, but there is still money to be made from BTL property and strong demand for BTL loans across the UK.

”Specialist lenders like us are better placed to service the needs of larger, more professional landlords than the high-street lenders, which are set up to do a large volume of simple deals”

The growing importance of larger, more professional landlords in the BTL sector plays into our hands as a specialist lender. These borrowers tend to be buying through limited companies and SPVs, and have more complex borrowing requirements than smaller landlords. Specialist lenders like us are better placed to service their needs than the high-street lenders, which are set up to do a large volume of simple deals.

As an industry, we have also become increasingly competitive. The gap between the rates offered by high-street banks and specialist lenders has narrowed as the mainstream lenders have retreated and we have become more active. Our own cheapest rate on a two-year fixed-price deal is 3.39%.

Launching into the BTL market also fits in with our drive to offer property professionals a broad range of products. We are now much more than just a bridging lender. In 2017, we launched our second charge product, which has proved really successful – we have since completed more than 2,000 second charge loans. Last year, we also entered the development lending market, where we are able to offer small developers loans at up to 75% loan-to-GDV and 85% loan-to-cost.

One-stop shop

Our expansion into these new areas of the market means we are able to offer property professionals a one-stop shop. Instead of having to switch between different lenders, they can come to us for all their borrowing needs. Being able to offer a range of different products is particularly important in today’s increasingly uncertain world. Borrowers want certainty from their financing arrangements and that can come from building relationships with a small number of lenders, rather than constantly chopping and changing. If a borrower has taken out a bridging loan with us to acquire a property, then it is far easier for us to refinance that loan than it would be to write a loan with an entirely new customer. We already know the borrower and the property and understand the business plan.

Indeed, we are already seeing some of our customers moving between products, perhaps starting out with a bridging loan and then turning to us again for a development loan. We expect it will be the same story with BTL lending. We will undoubtedly broaden our client base, but we also expect existing customers to account for a significant portion of our BTL lending. Small developers that have turned to us for bridging loans or development finance can now use us to finance their BTL property portfolios. A BTL loan can also be a good option for developers that perhaps find it hard to sell some units in a new development, and want to let them out until conditions in the for-sale market improve.

We are also seeing growing demand for bridge-to-let loans, which naturally complement BTL loans. Some landlords are struggling to achieve the returns from their BTL properties that they once did because of tax changes and new regulations. Naturally, they are therefore looking for ways to boost their returns, and refurbishing a property that is in a poor state of repair with a view to then letting it out is an increasingly popular strategy. A bridge-to-let loan can be a great way to finance such a project and at the end of the loan term, the borrower can switch to a BTL mortgage.

So despite all the well-documented challenges facing the BTL market, we see plenty of opportunities, especially for specialist lenders like us that are geared up to support larger BTL landlords and SME developers. Ultimately, we believe that for investors that are willing to take a long-term view, the future for the property sector is positive and so we are happy to be entering the BTL lending market, and to continue growing the range of lending products we offer property professionals.

By Stephen Wasserman

Source: Property Week

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Buy-to-let mortgage competition soars to pre-crisis levels

The number of buy-to-let mortgages on the market is at its highest level since October 2007 but rates have also increased, data from Moneyfacts.co.uk has revealed.

According to statistics released today, there are currently 2,396 buy-to-let products on the market, a figure which as soared in the past month alone by 143.

It comes despite regulatory changes, which have dampened enthusiasm from many would-be buy-to-let investors and disheartened those already in the market.

It is also the highest level of product availability since before the financial crisis, when the total number of products stood at 3,305.

Average rates

Yet, despite this rise in numbers and competition within the market, rates have not fallen. In fact, according to Moneyfacts’ data, over the past 12 months the average two-year buy-to-let fixed-rate mortgage has increased by 0.17% from 2.88% in June 2018 to 3.05% this month.

The average five-year buy-to-let fixed rate, meanwhile, has increased by 0.11% and now stands at 3.54% compared to 3.43%, which was the typical rate in June last year.

Although the rates are going upwards, they are still nowhere near the average of 6.36% for a two-year fixed rate and 6.39% for the five year version that the buy-to-let market experienced in October 2017.

Choice for investors

Moneyfacts said the fact the availability of products had increased by 21% in the past year indicated providers were keen to offer buy-to-let investors plenty of choice within the sector.

Darren Cook, finance expert at Moneyfacts, said: “The buy-to-let market has experienced a number of regulatory changes of recent years, however it seems product competition within this specialised mortgage area is continuing to grow.”

Cook said the largest concentration of product choice was at the maximum 75% loan-to-value (LTV) tier, where there were 352 two-year fixed-rate products – which is 44% of the market – and 374 five-year mortgages, which is 48% of this market.

The average fixed rates at the 75% LTV tier, for both the two and five year sectors, were at 3.05% and 3.55% respectively, according to Moneyfacts. These rates equalled, or nearly equalled, the average rates for both terms across all tiers.

Cook added: “The increase in the BTL average rates contrasts with the downward trajectory of their residential mortgage counterparts, where product competition seems to have instead resulted in rates falling.

“This disparity in trends is likely to be attributed to the different approach lenders take to risk between these two sectors, and that economic uncertainty may be having a more adverse influence on the BTL mortgage market than it is having on the residential mortgage market.”

(Source: Moneyfacts Treasury Reports)  

All available BTL products Two-year fixed rate BTL mortgage Five-year fixed rate BTL mortgage
  Product numbers Product numbers Average rate Product numbers Average rate
Oct-07 3,305 409 6.36% 181 6.39%
Jun-18 1,929 678 2.88% 637 3.43%
May-19 2,253 739 3.02% 730 3.53%
Jun-19 2,396 802 3.05% 785 3.54%

By Kate Saines

Source: Mortgage Finance Gazette

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Buy To Let Mortgage Upper Limits Rising

Buy to let mortgage upper limits are rising, allowing property investors to buy properties costing in the millions to rent out.

Many high-income individuals choose to rent property rather than buying, enjoying the extra flexibility that renting can offer. So, can buy to let property investors take advantage of high upper limits to enter the luxury housing market?

When offering home loans, lenders set maximum limits on how much they will offer to borrowers who meet their criteria. These upper limits can vary depending on the loan-to-value ratio (LTV) that you’re borrowing at – with lower LTVs sometimes offering higher limits.

The latest lender to increase upper limits on their buy to let mortgages is Coventry Building Society who has increased its maximum buy to let borrowing limit to £750,000, meaning it now offer mortgages on properties worth up to £1.5 million.

However, some other lenders already offer upper limits far higher than that on their buy to let products.

Metro Bank and Bank of China both offer buy to let investors maximum loans of £5 million at up to 60 and 65 per cent LTV respectively. This means that you could buy a property worth more than £8 million if you have a handy £3 million as a deposit.

Metro Bank will also offer up to £3 million at 70 per cent LTV, while Kent Reliance can offer the same upper limit at 75 per cent LTV.

If quite so large a deposit is a problem do not fear, Kent Reliance offers loans of up to £3 million at a much higher 80 per cent max LTV, meaning you can buy a property worth up to £3.75 million with just a £750,000 deposit. The same lender will offer up to £1 million at 85 per cent LTV.

Highest Buy to Let Upper Limits

LTV Lender Max loan Max property value
60% Metro Bank £5m £8.3m
65% Bank of China (UK) £5m £7.7m
70% Metro Bank £3m £4.3m
75% Kent Reliance £3m £4m
80% Kent Reliance £3m £3.75m
85% Kent Reliance £1m £1.2m

Source: Residential Landlord