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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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BTL investors seek larger loans as they look to diversify

A majority of buy-to-let landlords are applying for larger loans as market conditions encourage borrowers to buy more expensive properties and diversify their portfolios.

According to buy-to-let lender Keystone Property Finance, three in five of its customers applied for a mortgage in its larger loans range, which offers loan sizes between £250,000 and £1m, since December.

The lender said the popularity of larger loans could be due to landlords being able to afford more expensive properties as a result of the stamp duty holiday.

Elise Coole, managing director of Keystone Property Finance, said: “Our data shows that landlords remain confident about the buy-to-let market, with the majority of customers looking to secure a larger loan to purchase their property.

“Undoubtedly, the [stamp duty holiday] has played an important part in this and has presented landlords with an excellent opportunity to bolster their portfolios and invest in higher value properties.”

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Chris Sykes, associate director and mortgage consultant at Private Finance, said with possible rent arrears during the pandemic, this had partly encouraged landlords to consider diversifying their portfolios, thus requiring larger loans.

A November survey from Citizens Advice found half a million private renters were behind on their rent. MPs have called on the government to support tenants to repay rent arrears caused by the pandemic, including funds for landlords to help them receive income and avoid evictions.

Sykes said: “We have many portfolio landlords who traditionally only did single let family homes for example, who now are looking into houses in multiple occupation, multi-unit freehold blocks, holiday lets, etc.

“Many are even going further afield than that and are looking into commercial or semi-commercial property or development opportunities for higher yields, perhaps more hands-on investments but the profits often are considerably higher and [often require] larger loans to get things done.”

Data from Hamptons shows 15 per cent of all sales agreed in November were to landlords, the highest figure for four years, with investors “rushing to complete” their purchases before the original stamp duty holiday March deadline, according to the estate and letting agent.

Matthew Fleming-Duffy, director at Cherry Mortgage & Finance, said his firm had seen over 60 per cent of its business come from landlords between December and mid-March.

Likewise Aaron Strutt, product and communications director at Trinity Financial, noted demand from borrowers purchasing expensive buy-to-let properties due to cheap rates.

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Strutt said: “We are getting more calls from borrowers who are keen to purchase an investment property.

“There are a lot of landlords with £250,000-plus mortgages keen to remortgage and get the best possible deal. There is also demand from borrowers purchasing expensive buy-to-lets because of the cheap rates.”

The figures from Keystone Property Finance also found that three in five applications (62 per cent) for its larger loan products were from landlords registered as a limited company.

Mark Harris, chief executive at SPF Private Clients, said his firm had seen a marked interest in setting up a buy-to-let limited company.

Harris said: “We have seen significant interest from landlord clients with regard to switching to a limited company and lenders are recognising this with a wider range of products at competitive pricing.”

By Chloe Cheung

Source: FT Adviser

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Most profitable locations for buy-to-let landlords revealed

Brighton, Bangor, Portsmouth and Leeds are the top places for buy-to-let landlords, research from CIA Landlords has revealed.

Ranked at the bottom of the table is St Albans, with the poorest prospects for landlords this year, with some potentially making a loss of more than £700 a month.

Only six locations in London remain profitable, with the majority of boroughs losing money.

The research also reveals that profitability in the Capital has nearly halved since January 2020, amid a major exodus during the pandemic.

Brighton remains the most profitable place to be a landlord for the second year running, with landlords in the coastal town making a monthly profit of around £570.

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The findings, which took into account rental fees charged to tenants and landlord costs placed Bangor in second place (£500.53), Portsmouth in third place (£479.27), Leeds in fourth place (£477.60) and Lancaster in fifth (£474.54).

Bristol, Coventry, Manchester, Nottingham and Salford rounded out the top ten.

Stuart Williams (pictured), director of Thirlmere Deacon, said: “Over the last few months, some landlords have seen their profits dented due to the Chancellors’ tax measures that are only now taking effect.

“Undoubtedly, it is becoming more difficult for amateur investors to make a profit in the buy-to-let market due to legislation changes and financial pressures, there is still a lot of money to be made if landlords and investors make the right investment decisions.

“If investors can purchase cheaper properties with higher yields, they will have the opportunity to protect and boost their profits in the longer term. For example, an average residential property in London is around £500k with rental yields of circa 2%, while a flat in a good area of Manchester could cost half the price and generate 6-7% rental yields on top of 4-5% annual capital appreciation

“Landlords should review their existing portfolio to see if they can boost rental income and protect profits, by attracting a different market. Landlords will often find the best returns in urban areas, with a concentration of students and young professionals.

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“It is also worth landlords considering setting up a limited company and using this structure to hold their properties.

“This will enable them to continue deducting mortgage interest when they are calculating profits. Buy-to-let Landlords can also benefit from just 20% corporation tax, instead of income tax of up to 45%.

“Landlords need to do a serious portfolio review and work out how the tax changes affect them and what options there are to save, or make more money. For example, remortgaging to get a better deal or renovating some old stock – these costs will be tax-deductible.

“Alternatively, landlords could consider selling some properties or increasing the rent.”

By Ryan Fowler

Source: Mortgage Introducer

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BTL landlords reveal market confidence by opting for larger loans

Data from Keystone Property Finance has revealed that mortgage products designed to offer exclusive rates for higher loan amounts are the most popular product among BTL landlords, with more than half (58%) of Keystone clients applying for their larger loans range since December 2020.

The specialist BTL lender’s larger loan range caters for loan sizes of £250,000 – £1m and offers rates from 3.09%.

The rise in popularity for larger loans could be attributed to landlords looking to take advantage of the stamp duty incentive and being able to afford more expensive properties as a result of the tax saving. Data shows that landlords made up 15% of all sales agreed in November 2020, the highest level for four years, as a result of the stamp duty incentive.

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Keystone’s figures also signal a growing confidence in the market, as landlords continue to take out larger mortgages in expectation of a continued uptick in future property prices and of positive rental yields post-pandemic.

The data also reveals differences in the types of landlords applying for the specialist lender’s larger loan products, with nearly two-thirds (62%) of applications coming from limited companies compared to 38% of applications from individual landlords.

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Elise Coole, managing director of Keystone Property Finance, said: “Our data shows that landlords remain confident about the BTL market, with the majority of customers looking to secure a larger loan to purchase their property.

“Undoubtedly, the SDLT incentive has played an important part in this and has presented landlords with an excellent opportunity to bolster their portfolios and invest in higher value properties.

“The private rental market plays a critical role for millions of people and at Keystone Property Finance, we’re committed to supporting our brokers and their landlord clients by offering a wide range of innovative solutions.

Source: Property Wire

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Number of prospective tenants continued to rise in February

In February, the number of new prospective tenants in the UK rose for the second consecutive month according to the latest Private Rented Sector report by ARLA Propertymark.

The data showed that the average number of new prospective tenants registered per branch continued to rise in February to 82, from January’s figure of 81. Year-on-year this remains the same as February 2020 but is a huge leap from the previous February figure of 65 in 2019.

Regionally, the West Midlands had the highest number of new tenants registered per branch with an average of 126, with the East Midlands having the second highest of 123 new tenants. Northern Ireland and The Isle of Wight both recorded the lowest number of new prospective tenants, with an average of 26 registered per branch in February.

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The number of tenants experiencing rent increases jumped in February as half (49%) of agents saw landlords increasing rent compared to 39% in January. Year-on-year this figure is also up from 40% in February 2020. The number of tenants successfully negotiating rent reductions remained the same at 2% in February. Year-on-year, this is the same as during February 2020.

The number of properties managed per letting agent branch fell for the third month in a row from 196 in January to 195 in February. Regionally, the North East had the highest number of properties managed per letting agent branch with a figure of 284. Rental stock was the lowest in London, with an average of 94 properties managed per branch.

The number of landlords selling their buy-to-let properties remained the same for the fifth month in a row, at four per branch in February. Year-on-year, this figure is slightly lower than the February 2020 figure of five.

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Mark Hayward, chief Policy Advisor at Propertymark, said: “Today’s report demonstrates that the rental market continues to show no sign of slowing down, as demand for rental properties rose yet again in February.

“Letting agents have continued to support landlords and their tenants throughout the ongoing COVID-19 difficulties, and it is essential that tenancies are maintained wherever possible to ensure rent keeps flowing.”

Source: Property Wire

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Growing interest from new investors in BTL market

Interest from new investors in the buy-to-let market is growing, according to Knowledge Bank’s latest tracker results.

The analysis of brokers’ searches in February found intermediaries are working with potential new landlords, and the furlough scheme is still of interest in the residential market.

For the tenth month in a row, buy-to-let brokers reported interest from ‘first-time landlords’, with the criteria reaching the top five, and in February it was the most-searched term by brokers.

Knowledge Bank believes this demonstrates the interest in the rental market from investors, who would normally look to deal in stocks and shares, but are now shifting attention to buy-to-let.

‘First-time buyer’ also featured in the top five most searched for terms by brokers for the second consecutive month.

Looking to the residential market, ‘soft footprint at DIP stage’ returned to the top five most-searched terms after a month’s absence.

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The firm said this suggests brokers are looking for processes that will not impact future applications, due to clients having lower credit scores.

The rest of the top five were unchanged from January, with furlough again top of the searches.

‘Maximum age at end of term’ was again the second top searched term, with older clients looking for finance.

There was also more interest from those who are self-employed, with ‘self-employed – one year’s accounts’ in the top five for the tenth consecutive month.

The second charge market once again saw an interest in managing debt as two of the terms in the top five related to debt management.

In the bridging sector, ‘second charge loan’ was in the top five for the first time since October 2020.

Matthew Corker, operations director at Knowledge Bank, said: “The rental market in the UK is receiving a lot of interest at the moment.

“Perhaps as a result of the volatility in the stock market due to the pandemic, investors are turning to what they see as a safe investment.

“With house prices increasing in the past year and interest in rental properties also on the increase, this trend could be set to continue.

“However, with the government announcing they would back 95% loan to value mortgages, this may help more first-time buyers onto the housing ladder, and may see less looking to rent in the future.

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“The furlough scheme was again at the top of the list for brokers in the residential market, and the latest extension to the job support scheme will undoubtably result in more lenders adjusting criteria.

“The stamp duty extension may bring a raft of new clients to the market. However, they will need to move quickly as even with the extra three months, the deadline is still tight for those who have not already started the process.

“With these latest government decisions, lenders are certain to continue adapting criteria to keep up with the evolving market.

“With changes coming thick and fast, brokers could spend hours every day searching for the latest criteria, so using a comprehensive criteria search system can save them a massive amount of time and ensure they are providing best advice.”

By Jake Carter

Source: Mortgage Introducer

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House Purchase Lending In Q4 At 13-year High

House purchase lending in Q4 2020 reached its highest quarterly level since 2007, UK Finance’s household finance review has found.

With buy-to-let Q4 2020 saw the highest purchase activity since Q1 2016.

In December lending levels were 31% higher than the same month a year earlier.

Eric Leenders, managing director, personal finance at UK Finance, said: “Homebuyers looking to take advantage of the stamp duty holiday were behind the housing market’s strongest quarter for purchases in 13 years, in the final quarter of 2020.

“The stamp duty holiday helped to boost activity at the end of 2020, and it is likely many of these purchases have been brought forward in order to take advantage of the savings.

“The Chancellor’s announcement in the Budget to extend the Stamp Duty holiday until the end of June before then phasing it out will prevent a cliff edge, reducing the risk of house sales collapsing and will prove beneficial for all parties involved in the housing market.”

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Despite the strong end of the year, annual purchases for the whole year were around a tenth lower than the previous year, due to a complete shutdown of the market in the first lockdown.

Richard Pike, Phoebus Software sales and marketing director, said: “The housing market, like many things, is more than the sum of its parts and, with the overall picture painted by these figures from UK Finance, it is evident that the number of mortgage approvals is only part of the story.

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“The stamp duty holiday obviously did as it was intended, stimulating the market in difficult circumstances. It has also created increased demand in a market where there isn’t enough property to meet that demand, which in turn is pushing prices up across the country.

“With many transactions in the pipeline the extension to the SDLT holiday, announced in the Budget yesterday, will go some way to ensuring that more of these complete before the new deadline.”

BY RYAN BEMBRIDGE

Source: Property Wire

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Buy To Let purchase surge likely thanks to SDLT extension

A property lawyer is forecasting a surge in buy to let purchasing in the coming months as the stamp duty extension and the promise of low interest rates form an irresistible combination for investors.

That’s the view of property law firm Wilsons which believes Chancellor Rishi Sunak’s Budget will spur new investors.

In the fourth quarter of 2020, 61,800 buy to let properties were purchased, the highest quarterly figure since 2017. Wilsons says the SDLT holiday was a significant contributor to this upturn in property transactions.

Buy to-let investors have purchased 102,267 properties since the SDLT holiday came into effect in July 2020.

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Imogen Lea, a tax consultant at Wilsons, says: “The welcome three-month extension to the SDLT holiday gives potential property investors a second chance to purchase with no SDLT up to £500,000.

“The extension to properties valued at £250,000 or less, which will be introduced in July and run to September 30 could see more sustained growth in buy to let investments in parts of the country where property prices are lower, or in smaller dwellings.

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“The million-dollar question, is whether this will be enough to keep the market buoyant in the medium and long-term?

“Landlords are also hoping that the end of the lockdown will see young professionals, many of whom have spent much of the crisis staying at their parents’ homes, return to renting in city centres.”

Lea concludes: “Interest rates in the UK are likely to remain low for the foreseeable future, which should attract more investment to the residential property market versus virtually zero interest on bank deposits and government bonds.”

Source: Letting Agent Today

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Buy-to-let Investment – Newcastle Named As a BTL Hotspot

Newcastle is the top location for buy-to-let investment, according to data from lettings platform Mashroom.

For the most profit per calendar month excluding any fees such as interest and insurance, Newcastle is the best place for a buy-to-let scheme, gaining a profit of £233.76.

Mashroom looked at the average cost to buy a home in the millennial hotspot areas and compared it to the average monthly rent to find out where the most profit can be gained from property investment.

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In contrast, millennials who are investing in a buy-to-let scheme within London are losing an estimated amount of £253.83 a month.

The data also shows the happiest tenants are in London, Manchester and Birmingham.

Mashroom found that three quarters of tenants describe relationships with their landlord as “good” and “very good” and 89% of landlords feel the same.

In addition, searches for let-to-buy schemes rose by 614.29% over the past year.

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Stepan Dobrovolskly, chief executive of Mashroom, said: “Tenants and landlords often see each other as enemies, but a lack of communication is usually the reason why relationships break down.

“This could be because a letting agent or property manager is acting as the go-between but isn’t relaying the information correctly.

“When landlords and tenants communicate directly, the results are better – whether it’s arranging repairs or paying the rent on time.

“From what we’ve seen, by having strong lines of communication, both landlords and tenants have more respect for each other.

“This builds healthier relationships that create a better renting environment for everyone involved.”

By Jake Carter

Source: Mortgage Introducer

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