Buy-to-Let Landlords on Buying Spree
Competition in the buy-to-let market continues to grow as more landlords are using equity from their existing portfolios to invest in new properties.
Growth
New research from Mortgages for Business indicates that additional purchases accounted for a larger proportion of borrowing in the last quarter of 2013 for all property types. Additionally, landlords can now choose from more than 500 different mortgage types.
47% of new fixed rate mortgages were taken out for new buy-to-let properties in the final quarter of 2013. This is in comparison to 38% in quarter three and 31% at the beginning of 2013.[1]
Furthermore, the number of mortgages for new Houses in Multiple Occupation (HMOs) also rose during 2013. 29% of mortgages against HMO’s in the final quarter were for new investments, in comparison to 23% during quarter three and 20% in the final quarter of 2012.[1]
Remortgaging
Despite remortgaging making up the bulk of buy-to-let activity, there has been a substantial fall in activity during the last six months. During the final quarter of last year, 53% of buy-to-let transactions were a remortgage. This figure is down from 65% in quarter two. In the case of HMOs, 71% of buy-to-let activity was a remortgage in the final quarter, compared to 84% six months ago.[1]
Yields
As a consequence of spiralling price rises, returns on buy-to-let investments dropped for all property types during the last month of 2013. Fixed rate buy-to-let yields fell slightly to 5.9% from 6.3% in quarter three, while yields for HMOs dropped from 11.8% to 10.4%. [1]
David Whittaker, Managing Director of Mortgages for Business, feels that an increase in choices open to landlords does not necessarily just mean cheaper costs.
Whittaker explained: “More mortgage choice isn’t just delivering cheaper deals, there are now even more imaginative and flexible financing options out there too, many of which offer some of the best yields.
“With demand for tenancies as strong as ever, landlords are making use of a more buoyant situation to boost their portfolios. As we move into 2014, capital accumulation is accelerating and joining solid rental income to make buy-to-let consistently attractive to investors.”[1]
[1] http://everyinvestor.co.uk/2014/01/24/buy-let-landlords-buying-spree/