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Record 47,400 Buy-to-Let Companies Set Up in 2021

Last year saw a record number of companies set up to hold buy-to-let property. In total there were 47,400 new buy-to-let companies incorporated in 2021 across the UK according to Companies House data.

This is nearly twice the number that were set up in 2017 when it was announced that investors with properties in their personal names would no longer be able to claim mortgage interest as an expense. While individual landlords are effectively taxed on turnover, company landlords are taxed on profit. This has meant that for some landlords – particularly those who are higher rate taxpayers – it has become more profitable to move their buy-to let(s) into a company.

However, the rate of growth in new incorporations fell compared to previous years, with a 14% increase recorded between 2020 and 2021, down from a 30% increase recorded between 2019 and 2020.

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While the number of buy-to-let companies up and running in the UK passed through the 200,000 mark as the country emerged from the first lockdown, by 2021 this figure rose to a new total of 269,300. 61% of these companies have been set up since the withdrawal of mortgage interest relief which began in April 2017.

The average buy-to-let company has been operating for 9.2 years, a figure which has fallen amid the rising number of new incorporations over the last five years. At the other end of the scale, 7,900 or 3% of companies have been running for more than 50 years, while 440 have been going for more than a century.

50% of new buy-to-let mortgages in 2021 were taken out by a company rather than someone buying in their personal name, meaning we estimate that around half of all new landlord purchases last year used a company to hold their buy-to-let. 40% of these new purchases went into a company which was less than a year old, suggesting newer landlords still account for a sizable proportion of growth.

Buy-to-let companies currently hold a total of 583,000 mortgaged properties, accounting for around 29% of all existing buy-to-let mortgages nationally. This figure has increased from 26% over the last 12 months.

The bulk of new buy-to-let companies set up in 2021 were in London and the South East, with the two regions together accounting for 45% of all new incorporations. These two regions have long led the incorporation charge given higher rents mean the tax advantages from incorporation are generally larger. Only the North East, the cheapest region in the country, saw fewer (-6%) buy-to-let companies set up in 2021 than in 2020.

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Northern Ireland (36%) has seen the biggest annual increase in the number of new buy-to-let companies set up, albeit from a low base.

While the number of buy-to-let incorporations has continued to grow, around 25,100 have closed their doors since the onset of the pandemic. 15,200 companies closed in 2021 which equates to around 6% of all buy-to-let companies up and running today. The average company closed down after 5.8 years, a figure which has fallen steadily in recent years as the number of incorporations has increased.

RENTAL GROWTH

Despite rental growth across Great Britain peaking over the summer months, an annual growth figure of 7.2% recorded in December 2021 means that rents were rising at around twice the rate recorded in December 2020. This compares to a peak of 8.7% in July 2021 and 7.9% in November 2021.

For the sixth month running, rents grew faster in the South West (12.8%) than in any other region. This growth means that average rents have now surpassed £1,000 per month in all four Southern regions of Great Britain: London before our records began in 2012, the South East in July 2016, East of England in December 2020 and the South West in December 2021.

Rental growth continued to strengthen in Greater London on the back of a recovery in Inner London. Inner London rents rose 8.6% over the last 12 months, the fastest rate since March 2016. This leaves the average rent here just 2.0% below where it was on the eve of the pandemic in January 2020.

Rental growth (3.7%) in Outer London has remained considerably more stable, returning to its pre-pandemic trajectory.

Source: Property Wire

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UK Finance: BTL purchase lending up 83% in 2021

UK Finance has predicted that buy-to-let (BTL) purchase activity will have increased to £18bn this year, up 83% on 2020.

UK Finance said the main driver of lending in 2021 was for house purchases at £200bn, up 53% on 2020; however, homeowner remortgaging activity was slightly down on last year at £62bn.

The predictions outlined that total house purchase transactions, including cash purchases, will reach 1.5 million in 2021, some 47% higher than 2020, and the highest number since before the Global Financial Crisis.

UK Finance estimated that gross lending overall would peak at £316bn, up 31% on 2020, then moderate to £281bn in 2022, before increasing again to £313bn in 2023.

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Looking ahead, UK Finance said that while the 2022 and 2023 gross lending figures will be reductions on the 2021 peak, they will be higher than the 2020 and 2019 figures, representing a return to more stable levels of activity.

James Tatch, principal, data and research at UK Finance, said: “2021 has been a bumper year for mortgage lending amid the stamp duty holiday and homeworkers moving from cities.

“The outlook for the housing and mortgage markets over the next two years is for a return to more stable, balanced picture following the upheavals of the last two years.

“While risks remain, both to new lending and ongoing affordability, the market looks to be emerging from the pandemic in a better place than previously anticipated, supported by a much-improved wider economic outlook.”

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Elise Coole added: “It has been an enormously busy year for the buy-to-let market, with pent-up demand from the pandemic and the end of the stamp duty causing a spike in activity.

“UK Finance has predicted a significant slowing of purchase volumes in the buy-to-let sector next year, but this is not surprising given how pumped up the market was by artificial stimuli this year.

“What’s important though, is that UK Finance expects another strong year of lending next year, both for purchase and remortgage, with remortgage activity being driven by the tax changes introduced by George Osborne when he was Chancellor.”

By Jake Carter

Source: Mortgage Introducer

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Buy to let – Rental yields reach three year high

During the first quarter of 2021 average rental yields have increased to 6.0%, the highest recorded in three years, research from Paragon Bank has revealed.

Rental yields have climbed by 0.2% from 5.8% in Q4 2020 to 6.0% in Q1 2021. This represents a year-on-year increase of 0.7% after landlords said they were able to generate average yields of 5.3% in Q1 2020.

As part of a survey of just under 900 landlords, carried out by BVA BDRC on behalf of Paragon Bank, landlords were asked what rental yield they currently receive, taking into account rental income as well as any mortgage, maintenance and other costs associated with running their letting portfolio.

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The highest average rental yields are currently achieved by those managing lettings businesses in the South West (6.7%) and North East (6.6%). Landlords with property in Central London continue to achieve the lowest yields at 5.4%, due to higher average property prices in the capital.

Correlation between typical yields generated and portfolio sizes were also identified after single property landlords recorded average yields of 5.7%, while landlords who operate portfolios containing 20 or more properties responded saying they are able to generate average yields of 7.1%.

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Richard Rowntree, managing director for nortgages at Paragon said: “Rental yields are a key measure for landlords so it’s encouraging to see them indicate being able to generate average yields of 6.0%.

“The fact that this is a 3-year high and is being reported alongside continued high levels of tenant demand suggests that the private rented sector has bounced back well from the Covid-19 pandemic and is actually stronger as a result of providing stable homes for tenants during the challenges of the past year or so.”

Source: Mortgage Introducer

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Northern regions remain strong for buy-to-let investment

Buy-to-let properties in the North continue to present an attractive investment opportunity for landlords, offering some of the highest price rises and rental yields.

The UK house price index for February showed the North West was the English region with the highest annual price growth. Average prices in the region rose by 11.9 per cent to £184,351 in the year to February, up from 10.5 per cent in the month before.

By comparison, London saw the lowest annual growth, where average prices increased by 4.6 per cent over the year to February, down from 5.7 per cent in January.

Rental yields in Q1 2021 were also highest in the North, particularly in the North East (9.1 per cent), Yorkshire and Humberside (8.2 per cent) and North West (7.8 per cent), according to data.

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Angus Stewart said: “For landlords it is all about yield – how much rental income versus the price they pay for the property.

“For quite some time this has meant a shift away from London and the South East where historic higher house prices have outweighed the rental income available. This has been exacerbated by the Covid crisis that has hit rental income in London in particular.

“So, it’s not surprising to see in these figures house prices have been rising in the North West and Yorkshire in particular as investors chase those higher yields. At the moment these areas still look attractive for landlords as they are providing the rental income and the opportunity for capital appreciation.”

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Average rental yields by region, Q1 2021

RegionAverage rental yield
North East9.1%
Yorkshire and Humberside8.2%
North West7.8%
East Midlands6.7%
West Midlands6.5%
South West6.0%
Wales5.8%
East Anglia5.6%
South East5.1%
Greater London5.0%

Anthony Rose added: “Buy-to-let investors are viewing areas in the North as having very strong rental yields and the opportunity for further house price growth.

“As currently they only have to pay the 3 per cent stamp duty surcharge, this is offering very attractive investment opportunities with relatively small initial capital outlays, which is further increasing demand in these areas.”

By Chloe Cheung

Source: FT Adviser

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BTL Mortgage Offers Available To Landlords Climb Back Up

There are now 2,333 BTL mortgage deals available to landlords, the highest number since March 2020, when there were 2,897 deals available. While this has resulted in more choice for landlords, average rates have also risen.

The average five year fixed rate now stands at 3.41 per cent; its highest since September 2019 when it reached 3.44 per cent.

The average two year fixed rate currently stands at 3.05 per cent, again the highest in nearly two years. In June 2019 it also stood at 3.05 per cent.

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‘It is important to note that these are averages, and therefore while representative of the market as a whole, there are some very competitively priced products available, with some – depending on LTV and criteria – available at below 2 per cent’, said Moneyfacts’ Eleanor Williams.

‘Therefore, those who are hoping to refinance or take on a new deal would do well to shop around’.

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One other reason is that some deals offer incentives, such as free valuations or ‘no legal fees’. Williams said these are becoming scarcer ‘although interestingly, the proportion of the market where cashback is available has increased, not only year-on-year, but by 8 per cent over the last month’.

Source: Landlord Knowledge

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The buy-to-let boom is far from over, research has revealed

A year ago there were warnings that the buy-to-let market was looking increasingly bleak and that landlords were deterred from entering the sector, or quitting it altogether as a result of tax changes.

But despite scaremongering that there will be a ‘mass exodus’ of landlords, new data suggests that buy-to-let landlords are taking a far more pragmatic approach.

New data from Hamptons shows that last year 131,900 properties were sold by landlords in Great Britain, the smallest sell-off since 2013, when 105,830 properties were sold.

The research also reveals that the average landlord who sold up last year in England and Wales sold their buy-to-let for £82,450 or 42% more than they paid for it, having owned the property for 9.1 years on average.

The average landlord gross gain increased by £3,390 or 4% to £82,000 compared to 2019 – £79,060 – marking the first annual rise in more than five years.

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Landlords in London made the biggest gains. The average London landlord sold their buy-to-let for £302,200 or 71% more than they originally paid for it, having owned the property for 9.8 years on average.

Last year reversed the fall in a London landlord’s gross profit.  Despite the increase, typically landlords who sold in the capital last year made a smaller gross profit than those who sold in 2016 when they made an average gain of £364,960. 2016 marked the high point for landlord profit when many investors, having bought at the bottom of the market following the 2008 financial crash, decided to sell up.

The top 10 local authorities where landlords made the biggest gains were all in London.

Kensington and Chelsea topped the list. Last year the average Kensington & Chelsea landlord sold their buy-to-let for £784,980 more than they paid for it 10.6 years earlier.  The gain they made was 9.5 times greater than the average in England & Wales.  Camden, City of Westminster and Hammersmith & Fulham ranked second and third on the list, with the average landlord gain exceeding £500,000.

Landlords in the North East continued to make the smallest gains. The average landlord who sold up in the North East made £11,310 or 16% capital gain having owned for 8.0 years. Some 36% of investors in the region sold their buy-to-let at a loss, compared to just 12% in England & Wales overall.

This means that 37% of investors who sold in the North East last year would have paid capital gains tax (CGT) due to the sum being covered by their £12,300 annual allowance.  Across England & Wales, 77% of landlords would have paid CGT on their profit.  London landlords, who made the biggest gains, are most likely to have a tax bill to pay with 91% of investors making a gross gain surpassing the annual CGT allowance.  Investors can offset costs such as stamp duty and renovation expenses from their capital gains tax bill.

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The North East also had the highest share of landlords selling up.  Last year 24% of homes sold in the region were sold by a landlord.  This equates to around 9,730 homes.

Meanwhile, 17% or 15,540 homes sold in London were previously rented, down from 19% or 18,920 homes in 2020.

Some 9% of rental homes sold in Great Britain last year had been owned by a limited company landlord.  Last year,12,400 buy-to-let companies were dissolved. While the average buy-to-let company had operated for 6.2 years, 75% operated for less than five years.

Rental growth

In March, the average rent on a newly let home stood 4.4% higher across Great Britain than at the same time last year.  Regions outside London continued to see the highest rates of rental growth with rents increasing by 6.8% annually, the third consecutive month that annual rental growth outside the capital exceeded 5%. And apart from London, last month every English region recorded rental growth of at least 4%.

Rental growth in London continues to follow a different path, with rents falling 2.1%.  This marked the second month in a row that rents have fallen after turning positive between October 2020 and January 2021.  Once again, the fall has been led by Inner London where rents dropped 17.1%, the 13th consecutive month that rents have decreased.  While in Outer London, rents were 2.6% higher than at the same time last year, with tenants in Zones 3-6 viewing 48% more homes than in March 2020.

Aneisha Beveridge, head of research at Hamptons, said: “Last year, the number of homes sold by landlords reached a seven-year low.  A pause in the housing market during the first Covid-induced lockdown, which suppressed overall transactions, combined with an eviction ban throughout the remainder of 2020, limited the opportunity for landlords to sell up.

“Landlord sales have been relatively high over the last few years due to tax and regulatory changes that have reduced the profitability for some investors.  But given tax relief on mortgage interest will be fully phased out from the 20/21 tax year, it seems as though most landlords who would be hit hardest by these changes have already left the sector.

“Over the last few years, the average capital gain made by a landlord has been shrinking.  But despite the pandemic, stronger house price growth seems to have reversed this trend.  Landlords who have been in the game for the longest period of time have reaped the largest rewards.  The average landlord who owned their buy-to-let for more than 15 years made more than three times more than a landlord who had owned their property for less than five years.  Many of whom would have renovated and invested further in their property to add value.”

“Despite the gradual easing of lockdown, the London vs rest of the country rental growth divide remains entrenched.  Outside the capital would-be tenants are scrabbling over stock before it hits the portals, while in Central London landlords are chasing tenants just as relentlessly.  There are however signs of a return to Zone 1, with viewings up 64% year-on-year in March.  But record high stock levels mean rents are unlikely to start recovering to pre-pandemic levels until later in the year.”

Average landlord seller gain by region

RegionAverage Landlord GainYoY Change £Average % gainAverage length of ownership (years)
London£                      302,200 £         3,76071%9.8
South East£                      102,200-£         5,38045%9.2
East of England£                        90,590-£         2,63048%8.9
South West£                        68,250 £         2,16040%8.6
West Midlands£                        50,240 £         5,22042%9.0
East Midlands£                        44,560 £         2,96041%9.1
Wales£                        37,120 £         1,17038%9.6
North West£                        34,780 £            17036%9.0
Yorkshire & the Humber£                        30,800 £            94034%9.6
North East£                        11,310-£         3,50016%8.0
England & Wales£                        82,450 £         3,39042%9.1
Source: Hamptons & Land Registry

Top 10 local authorities where landlords made the biggest gains

Local AuthorityRegionAverage landlord gainAverage length of ownership (years)
KENSINGTON AND CHELSEALondon£784,98010.6
CAMDENLondon£735,2309.8
CITY OF WESTMINSTERLondon£627,04010.2
HAMMERSMITH AND FULHAMLondon£506,8009.5
ISLINGTONLondon£473,86010.2
HACKNEYLondon£392,69010.2
WANDSWORTHLondon£365,2209.4
BRENTLondon£355,2609.6
HARINGEYLondon£354,09010.2
HOUNSLOWLondon£347,79010.9
Source: Hamptons & Land Registry

Annual rental growth

Mar-20Mar-21YoY
Greater London£1,699£1,663-2.1%
     Inner London£2,570£2,131-17.1%
     Outer London£1,534£1,5742.6%
East of England£967£1,0215.5%
South East£1,050£1,1327.8%
South West£832£9089.1%
Midlands£694£7325.4%
North£644£6886.8%
Wales£654£7006.9%
Scotland£673£6963.5%
Great Britain£982£1,0264.4%
Great Britain (Excluding London)£832£8896.8%
Source: Hamptons

By MARC DA SILVA

Source: Property Industry Eye

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Buy-to-let product choice reaches one-year high, the analysis has revealed

Product choice in the buy-to-let market is broadening but rates are also on the rise, the latest analysis from Moneyfacts.co.uk has revealed.

Figures released today show availability of products is at a one-year high, having risen for the fifth consecutive month to reach 2,333.

Moneyfacts said the sector had recovered to 81% of pre-pandemic levels (compared to 68% recovery in the residential sector) and now offered the highest number of products seen since last March, providing landlords with a greater level of choice.

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Yet, at the same time, the average two-year fixed rate was 0.28% higher year-on-year – at 3.05% was the highest recorded since June 2019 (also 3.05%).

The five-year equivalent at 3.41% increased 0.17% compared to a year ago and was currently the highest since September of 2019, when it reached 3.44%.

Month-on-month, the only borrowing tiers where rates had fallen since February were at 60% loan-to-value (LTV).

Moneyfacts also revealed how the proportion of the fixed rate buy-to-let sector which was offering fee-free deals or incentives – such as free valuations or free legal fees – had also reduced year-on-year.

This, Moneyfacts, said, indicated landlords may have to search a little harder for deals with the right incentive package for them.

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Meanwhile, the proportion of the market where cashback was available has risen to 25% – a 4% improvement on last year.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “There is no doubt that the impact of the pandemic has been polarising, with the buy-to-let sector not escaping from this trend.

“There may therefore be landlords whose focus will be on cutting costs and increasing margins where possible, perhaps by refinancing their existing buy-to-let mortgages.

“Equally, there may be some who are now in the fortunate position of being able to consider investing in a rental property for the first time.”

Williams also explained how the only LTV tier where average fixed rates did not increase this month was at 60% LTV, where both the two and five-year average fixed rates fell by 0.38% and 0.27% respectively.

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She added: “It is important to note though that these are averages, and therefore while representative of the market as a whole, there are some very competitively priced products available, with some – depending on LTV and criteria – available at below 2%.

“Therefore, those who are hoping to refinance or take on a new deal would do well to shop around.”

Buy-to-let mortgage market analysis (Source: Moneyfacts)
Mar-20Feb-21Mar-21
BTL product count – fixed and variable rates2,8972,1002,333
BTL two-year fixed – all LTVs2.77%2.97%3.05%
BTL two-year fixed – 80% LTV3.56%3.97%4.14%
BTL two-year fixed – 60% LTV1.89%2.52%2.14%
BTL five-year fixed – all LTVs3.24%3.32%3.41%
BTL five-year fixed – 80% LTV3.98%4.11%4.29%
BTL five-year fixed – 60% LTV2.31%2.79%2.52%
Buy-to-let fixed mortgage market analysis (Source: Moneyfacts)
Mar-20Feb-21Mar-21
Deals with no product fee475 (19%)254 (14%)301 (15%)
Deals with free/refunded legal fees840 (34%)614 (34%)614 (30%)
Deals with a free/refunded valuation1352 (55%)774 (43%)789 (39%)
Deals with cashback531 (21%)307 (17%)503 (25%)
Data shown is as at first working day of month, unless otherwise stated. The % shown is the proportion of deals out of the fixed mortgage market. Source: Moneyfacts.co.uk

Source: Mortgage Finance Gazette

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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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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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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