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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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Falling buy-to-let rates make property a ‘tempting’ investment

Interest rates for buy-to-let mortgages are beginning to decrease, according to the latest data from Moneyfacts.co.uk.

Its figures revealed, since the start of May, the average buy-to-let two and five-year fixed rates for all loan-to-values (LTV) have fallen by 0.04% and 0.05% respectively.

What’s more, since March 2021 they have tumbled by 0.10% and 0.11%. At 2.95% and 3.30%, both rates are now the lowest they have been since January 2021 when rates were at 2.89% and 3.27% respectively.

According to Moneyfacts the largest reductions since the start of this month have been seen at 65% LTV.

In this tier the two and five-year fixed averages have dropped by 0.20% and 0.15% respectively to 2.68% and 3.17%, since the start of the month.

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This, said Moneyfacts, was great news for landlords with the required level of deposit or equity.

However, for those landlords with lower levels of deposit or equity the news is not so welcoming as the average two-year fixed rate at 80% LTV has slightly increased over the course of this month to sit at 4.20%.

There are more options available to borrowers in this tier, though, where rates are traditionally higher due to the higher level of risk, have also risen.

And those happy to lock into a five-year fixed rate at 80% LTV will benefit from average rate drops of 0.04% since the start of the month.

Eleanor Williams, finance expert at Moneyfacts.co.uk, said: “As lockdown restrictions begin to ease, the prevailing sentiment in the UK seems to be that of optimism.

“For a sector that has been beset by various changes and challenges over the last five years or so, the buy-to-let market is exhibiting remarkable resilience.

“While it goes without saying that the last year has presented great challenges to many investors in the sector, the latest Lettings Index from Hamptons illustrated that rents have risen by 5.9% in Great Britain in April 2021, the fastest rate of growth it has recorded since January 2015.”

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Williams added that the rate drops demonstrated an appetite from lenders to cater to borrowers who are keen to invest.

She revealed, as providers continued to tweak their ranges, Moneyfacts had seen rate reductions of as much as 0.90% from TSB, while Virgin Money made cuts of up to 1.06% on a selection of its products this month.

“Hampton’s indicated that the rise in rental growth may well be linked to the fact that there were 45% fewer homes available for rent in April 2021 compared to April 2019,” Williams added.

“For investors contemplating an expansion into the buy-to-let sector, demand from tenants is booming and while it remains difficult to earn a decent return on many forms of investment, it’s understandable why rental property could be a tempting option.”

Source: Mortgage Finance Gazette

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More Than a Quarter of Landlords Plan to Expand Portfolios

Just over one in four buy-to-let landlords are planning to expand their portfolio within the next 12 months, according to fresh research.

With buy-to-let continuing to deliver solid returns that outstrip many other asset classes, a survey by Knight Knox shows that 27% of buy-to-let landlords are currently planning to add to their portfolios in the near term.

The poll of 500 UK landlords by the property investment consultancy found that 27% of respondents are planning to expand their property portfolio in the next 12 months – influenced in part by the stamp duty holiday extension.

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Of those looking to invest in property at the moment, 35% say that the stamp duty holiday extension has influenced their decision.

Knight Knox’s commercial director, Andy Phillips, said: “The last 12 months have been a total rollercoaster for the housing market. Lockdown 1.0 temporarily halted activity before Rishi Sunak’s announcement of the stamp duty holiday led to the industry facing one of the busiest periods for a decade.

“For landlords, the incentive has provided a welcome opportunity to purchase more properties while making significant savings. Appetite for rental property is high – particularly given that the financial impact of the pandemic could be affecting people’s plans to purchase – so buy-to-let is a fantastic investment in the current climate.”

The research also found that on average, UK landlords earn over £20,000 net income per year from renting out properties and 88% are feeling confident or very confident about the buy-to-let market outlook for the next 12 months.

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Two-thirds of landlords said the pandemic had had no impact on tenancies within their properties and just 4% were planning to reduce their portfolio over the next year.

Phillips added: “The property market plays a crucial role in the country’s economy, so it’s encouraging to see that during times of crisis, the government has been forthcoming with lifelines to help keep the wheels of industry turning.

“As long as developers can continue to bring high quality property to market and landlords have the confidence to invest, the sector will remain buoyant and consumer demand for rental housing can be fulfilled.”

By MARC DA SILVA

Source: Property Industry Eye

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Broker optimism on BTL at seven-year high

The number of brokers expecting more buy-to-let business over the next 12 months is at its highest level since 2014, according to a survey by Paragon Bank.

In a February/March survey of 195 intermediaries, half said they were anticipating higher levels of buy-to-let mortgage business over the coming year, up from 41 per cent in Q4 2020.

The number of brokers who already saw strong demand for buy-to-let mortgages also rose, to 47 per cent in the first quarter of this year, up from 44 per cent in Q4 2020.

Meanwhile, the number of intermediaries who reported weak buy-to-let mortgage demand was at its lowest since before the start of the pandemic, at 12 per cent.

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Richard Rowntree, managing director of mortgages at Paragon Bank, said: “It’s fantastic to see that such high levels of optimism have been recorded following the challenges of the past year or so and that this is being driven by strong levels of demand.

“The extension of the stamp duty holiday is certainly a driver of that, but it is underpinned by longer-term demand for rental property.”

Carl Shave, director at Just Mortgage Brokers, commented: “With 2020 being a subdued year for buy-to-let investment due to the economic climate from the pandemic, it is pleasing to see the optimism from brokers and the positive reports of an uptake in demand. Indeed this is being reflected in the increase in enquiries for our advisers.

“The stamp duty holiday extension will at present add a little fuel to the fire as investors look to take advantage of the potential savings this can provide. It will therefore be interesting to see what impact this has on the market when it expires and the resulting longer term outlook.”

Paragon’s findings come after analysis by Hamptons found the number of properties sold by landlords last year slowed to a seven-year low, despite the first annual rise in profits on sales in more than five years.

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Earlier research from Foundation Home Loans before the stamp duty holiday was extended also suggested the end of the tax break would not prevent landlords from adding to their portfolios.

Hiten Ganatra said his firm was seeing an increased appetite from professional landlords looking to grow their portfolio, with returns being realised from BTL investments “far superior than to leave money in the banks”.

Ganatra said: “Landlords are happy to generate yields of 5 to 7 per cent, which invariably gives them an even great return on investment than holding cash.

“We are also seeing more and more landlords moving into the HMO [houses in multiple occupation] space which is helping to enhance yields to 8 per cent-plus.”

On the supply side, meanwhile, data from Moneyfacts has shown that product availability in the buy-to-let market continued to improve for a fifth consecutive month in March.

By Chloe Cheung

Source: FT Adviser

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New Mortgages for Energy Efficient Rental Properties

Paragon Bank has launched a range of buy-to-let mortgages with lower interest rates for energy efficient properties.

The 80% LTV mortgages charge a market-leading 3.99% interest, fixed for five years, exclusively for rental properties which earn an energy performance certificate (EPC) of A to C. The loans can be used for the purchase and remortgages of self-contained properties and houses in multiple occupation (HMO).

The lender hopes the new mortgages will encourage landlords to invest in the energy efficiency of their properties.

The number of properties in the private rental sector with an EPC of A to C has increased 272% over the past decade to 1.8 million. However, around six and ten homes in the sector still are at a grade D or lower.

Energy inefficient properties are expensive for tenants to heat and frequently dangerously cold. A government survey of the country’s housing stock has found that homes below an energy efficiency ratio (EER) of C cost an average of £500 more to heat each year than properties that achieve a C or better. Those high costs leave a disproportionate number of private tenants in fuel poverty—25% in England, compared to 10% across the wider population.

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The most energy inefficient rental properties are on average 2⁰C colder in winter than the most efficient homes, posing risk to tenant health.

Inefficient rentals are also responsible for high levels of carbon emissions. Nationally, energy use in homes account for around 14% of the UK’s greenhouse gas emissions and any pathway to net zero requires investment in insulation, double and triple glazing and low-carbon heating systems in homes.

Under proposed regulations, which the government began consulting on last autumn, all homes in the private rented sector will need a minimum EPC grade of C or better for new tenancies by 2025. All privately rental properties will need to achieve that grade by 2028.

Richard Rowntree, managing director of mortgages at Paragon Bank, said: “Landlords have made great strides in adding more energy efficient homes to the PRS – or upgrading properties to C or above standard—over the past decade. However, more needs to be done as the Government moves towards its net zero carbon target by 2050 and landlords have a key role to play in that.

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“Our new range of products at 80% LTV for homes with an energy rating of C or above will be an incentive for landlords to add energy efficient homes to the sector, benefitting tenants through lower energy bills and the environment through reduced consumption.”

Landlords, along with other homeowners, were extended some help in upgrading their properties with the government’s Green Homes Grant scheme. The initiative offered homeowners up to £5k to cover two-thirds of the cost of energy efficiency upgrades. However, the project was dogged by difficulties and was shuttered prematurely at the end of March, having issued just 28,000 vouchers for work and seen just 5,800 energy efficiency measures installed.

Source: Money Expert

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