Posts with tag: mortgages

Two-Year Fixed Rates Popular Among BTL Landlords

Published On: February 18, 2020 at 10:41 am

Buy-to-let (BTL) landlords are increasingly choosing to go with shorter-term mortgages when compared to previous years according to Mortgages for Business.

When compared to the last quarter of 2018, more landlords than ever have chosen shorter-term mortgages in the past 12 months, with 26% now opting for two-year fixed term products in Q4 2019, compared to just 8% in the same period in 2018.

This increase in demand for shorter terms may be fuelled by shorter Early Repayment Charge (ERC) periods, which allow landlords to refinance sooner without incurring a penalty- something that was seen as particularly useful in the politically turbulent time we saw last year.

Despite the increase, five-year fixed rate mortgages remain the most popular option, with 68% of landlords going in this direction. This is because two-year fixed rates include a higher standard of stress-testing to qualify, meaning that effectively, landlords can borrow more if they opt for longer-term products.

It is also worth noting that tracker mortgages have seen a slight increase in interest, up from 2% in Q3 2019 to 4% in Q4 of the same year, as landlords speculate that interest rates could be cut in the near future.

Commenting on the findings, Steve Olejnik, managing director of Mortgages for Business said:

“Recent political uncertainty has led more landlords to opt for 2-year fixed rates over longer-term fixed rate products. Landlords are drawn to the shorter Early Repayment Charge periods associated with these types of products, which provide greater flexibility. Given we now have more certainty in the political system, we forecast that landlords may start to look at longer term fixes again in the future.”

Landlords are also finding that on average, they can borrow 0.7% more through a limited company than when they borrow personally.

“More landlords are expanding their portfolios through a limited company which has proven to be a more effective borrowing vehicle both from a tax perspective and financially. Lenders have responded to that and demand has fuelled an increase in the number of products available.”

The number of buy-to-let mortgage products available increased by 72 to 1,981 in Q4 2019 up from 1,909 in the previous quarter. In addition, the number of buy-to-let products available to limited companies increased by 51 to 738 up from 687 in Q3 2019.

Olejnik said: “The increase in the number of products available to limited companies gives landlords more choice. Since Brexit was assured by the clear General Election result in December, British house prices have risen at their fastest rate since 2002, according to Rightmove. Houses in Multiple Occupation (HMOs) continued to produce the most substantial yields for landlords handling more complex portfolios, in at 9.2% Q4 2019.”

UK Finance lending trends show steady month for mortgages

Published On: November 20, 2019 at 10:35 am

Author: Em Morley

Categories: Finance News

Tags: mortgages,UK Finance

UK Finance has released the latest lending trends data for September 2019, revealing strong mortgage figures. The report highlights:

There were 29,100 new first-time buyer mortgages completed in September 2019, 1.6% more than in the same month in 2018. There were 29,050 homemover mortgages completed in September 2019, 1.8%more than in the same month a year earlier.
There were 17,740 new remortgages with additional borrowing in September 2019, 5.9% more than in the same month in 2018. For these remortgages, the average additional amount borrowed in September was £50,000. There were 19,140 new pound-for-pound remortgages (with no additional borrowing) in September 2019, 8% more than in September 2018.
There were 5,500 new buy-to-let home purchase mortgages completed in September 2019, 3.5% fewer than this time last year. There were 12,900 remortgages in the buy-to-let sector, the same amount as in September 2018.

Conor Murphy, CEO of end-to-end mortgage platform Smartr365, comments on UK Finance’s mortgage lending trends statistics: “Strong mortgage figures are mainly down to the remortgage market, with competition between lenders aiming to attract as much business as possible underpinning performance. For brokers, where there is competition there is also opportunity.

“As borrowers remortgage to take advantage of the lowest rates the industry has seen in years, most will be looking for advice to help them find the best deal. Brokers need to be available to handle both new business and existing clients, and they can only do so if they’re efficient with their time.

“Technology which removes manual tasks and the burden of admin is essential, and using it or not could make the difference between a healthy pre-Christmas bonus and a gloomy December.”

Nick Chadbourne, CEO of conveyancing solutions provider LMS, comments: “Overall remortgage activity is steady, with a slight bounce due to a peak in ERC expiries, but we are starting to see a shift in the balance of power within this market.

“Lower rates on 2-year deals have sparked competition between lenders, aiming to turn the heads of remortgagers, and borrowers have been taking advantage.

“Recent LMS data shows that although 5-year fixes remain the most popular product, purchases of 2-year deals have surged and closed the gap to just a few%. It’s tough to call whether this will continue as we move into the new year, but with low rates and slow price growth set to stay, we can be sure that the remortgage market is in good health.”

Shaun Church, Director at Private Finance comments: “The remortgage market continues to boom, as homeowners capitalise on the current price war between lenders.

“With mortgage rates hovering near record lows, borrowers coming up to the end of their terms should make the most of this opportunity and lock into the ultra-competitive rates of today well into the future through a five, 10 or perhaps even 15-year fix.

“The current rate war means there’s plenty of choice for borrowers looking to secure an affordable deal. However, cost-conscious mortgage customers should remember to look beyond the headline rate and take all fees and charges into consideration.

“Enlisting the advice of an independent mortgage broker can enable borrowers to secure the most suitable and affordable deal.”

Mark Gordon, Director of Money and Mortgages at Comparethemarket.com: “Remortgage activity has picked up again, with additional borrowing increasing by nearly 6% year on year. Providers are competing amongst themselves, slashing rates to attract new customers.

“Some of the most significant rate cuts are on five and ten-year deals, with homeowners increasingly opting for the longer-term options. With rates so low, borrowers coming up to re-mortgaging could end up overpaying if they don’t search out a cheaper deal.

“FCA research shows over 800,000 UK homeowners are on a standard variable rate mortgage, which usually has an interest rate of around 4.5%. Comparing the different deals out there could save thousands of pounds, the equivalent of a pay rise, holiday or home improvements.

“Regardless of whether you are a first-time buyer or homeowner, shopping around online can help you find the best mortgage deal.”

August mortgage trends show drop in buy-to-let homes purchases

Published On: October 16, 2019 at 8:27 am

Author: Em Morley

Categories: Landlord News

Tags: Buy-to-Let,mortgages

The latest mortgage lending trends data from UK Finance has been released, highlighting that fewer buy-to-let home purchase mortgages were completed in August 2019 than in the same month in 2018. 5,900 were completed, down by 3.3% on the previous year.

The highlights for august mortgage trends also include:

There were 13,800 remortgages in the buy-to-let sector, 0.7% fewer than in the same month in 2018.

There were 18,640 new remortgages with additional borrowing in August 2019, 2.9% fewer than in the same month in 2018.

For these remortgages, the average additional amount borrowed in August was £55,000.

There were 18,100 new pound-for-pound remortgages (with no additional borrowing) in August 2019, 2.3% fewer than in the same month a year earlier.

There were 35,010 new first-time buyer mortgages completed in August 2019, 0.7% more than in the same month in 2018.

This is the highest monthly total since August 2007 when there were 35,070 new first-time buyer mortgages.

There were 35,380 homemover mortgages completed in August 2019, 5.5% fewer than in the same month a year earlier.

Shaun Church, Director at Private Finance comments: “The number of first-time buyers has reached a 12 year high in the UK. While home-movers have been paralysed by Brexit uncertainty, first-time buyers have capitalised on favourable market conditions, taking advantage of easing house price growth, record-low mortgage rates and new product innovations to make their first step onto the property ladder.

“Government and industry must not, however, think that their job is done when it comes to first-time buyers. The average age of a first-time buyer in the UK remains high at 32, and many of today’s new homeowners are taking out mortgages with terms lasting as long as 40 years in order to afford repayments.

“This new generation of homeowners may therefore not achieve mortgage free status until their early 70s. Continued efforts need to be made to ensure that homeownership remains attainable early in adulthood, to avoid jeopardising this generation’s financial security later in life.”

Top Tips for Investing in Rental Property

Published On: September 25, 2019 at 8:26 am

Author: Em Morley

Categories: Landlord News

Tags: mortgages,property investment,rental yields

Top Tips for Investing in Rental Property

Following on from yesterday’s article on property investment in Liverpool, we’ve created a list of top tips for investing in property and making a profit from buy-to-let properties based on information provided by Simon Clarke from Acentus Real Estate.

Location, Location, Location
Focus on finding out which cities have the best long-term growth in terms of house prices and other economic factors. Clarke cites Liverpool as an example of a city that ticks all the boxes when it comes to financial stability. From its employment rate to its upcoming infrastructure investments, the city has much that makes it attractive to those looking to profit from property over the longer term.
Location, Location, Location
No, that’s not a typo. After choosing a city, narrow down your locale even further. Look at local amenities; are there nearby shops and bars? Is it near a frequent bus route or train station? Is it within walking distance to the business centre? Consider the quality of the neighbourhood, is it run down and lacking in investment or is it an up-and-coming area that could see growth in the next few years?
Amenities
As well as outside of the building, think about what is included inside. Apartments that come with a concierge service, onsite gym and communal garden areas are increasingly important to renters, and as such, have a higher demand. Clarke says:

“Next to location, a development’s amenities are one of the most important factors to consider before making an investment. If the building has features that make it stand out from the crowd, that’s going to increase its appeal to renters, helping to improve yields and avoid void periods.”

In terms of location and amenities, you should be seeing your investment as somebody’s home rather than a cash cow. Invest in a property that tenants would be happy to live in and in return you’ll attract tenants that look after the property and pay their rent for many months and years to come.
Get the Best Mortgage Deal
There are plenty of buy-to-let mortgage products on the market these days. In fact, a quick search for buy-to-let mortgages on Compare the Market, using the site’s pre-filled criteria, results in 393 product options at the time of writing. With so many products available, investors who are using a mortgage for their buy-to-let property purchase have plenty of choice over the terms of their borrowing.
Budget for Unexpected Costs
Since the Tenant Fees ban came into force in June, landlords are supposed to be responsible for costs such as maintenance, management and letting agency fees. Understanding from the outset what these costs might be is an essential part of calculating your likely yields and the development’s ongoing viability.

A financially responsible landlord should not be simply hiking the rent price to cover these fees, and if that seems like your only option then maybe property investment isn’t the right option for you.

UK Finance’s latest Mortgage Trends show increased interest in buy-to-let mortgages

Published On: September 19, 2019 at 9:05 am

Author: Em Morley

Categories: Landlord News

Tags: mortgages

The latest mortgage data for UK Finance’s lending trendshas been released, showing an increase in buy-to-let mortgages completed.

The highlights include:

There was a 5.8% increase in new first-time buyer mortgages completed in July 2019, compared to the same month in 2018.
There were 7.1% fewer new mortgages with additional borrowing in July 2019 than in the same month 2018.
There was a 5.5% increase in new buy-to-let home purchase mortgages completed in July 2019, compared to the same month in 2018.

Sam Harhat, Head of Financial Services at Andrews Property Group, has commented on this new data: “A collapse in remortgaging activity points to the rapidly rising popularity of product transfers but consumers need to be very careful with these.

“They may feel like the easy route for those reaching the end of their fixed term but product transfers with an existing lender, however attractive and good value they seem, will rarely be the most competitive option.

“It’s no surprise that first time buyers are still at the forefront of the market.

“The real surprise is a robust increase in activity by landlords, who are normally a bellwether to watch when it comes to economic uncertainty.

“Lenders are competing very hard for business and the result is we’re seeing a lot of innovation, especially surrounding self-employed mortgages and limited company buy-to-let.

“Despite the uncertainty surrounding our potential exit from the EU, more and more people are simply getting on with their lives.

“Property prices are competitive, the jobs market is strong and mortgage rates have once again nudged down in recent months.

“We’re seeing a definitive shift towards 5-year fixes, which can be as low as just over 2%. These fixes offer medium-term peace of mind, which for many people in the current climate is crucial.”

Shaun Church Director at Private Finance, has also commented: “As existing homeowners approach the UK property market with a slight sense of caution, first-time buyers continue to be emboldened by the current market conditions with the value of lending to first-time buyers reaching the highest level seen so far in 2019.

“The traditional barriers that have long been blocking many first-time buyers from purchasing a home over the years are eroding. House prices are easing, stamp duty has been taken out of the equation for many and mortgage rates have fallen considerably.

“The challenge of raising a sizeable deposit – which has typically been the greatest obstacle facing first-time buyers – has been minimised or removed altogether thanks to the flurry of 90-95% mortgages and launch of 100% mortgages.

“The options available to assist first-time buyers have arguably never been greater. The advice of an independent mortgage broker is therefore crucial for prospective homeowners to help them navigate this field of choice and ensure they’re making decisions best suited to their finances and future goals.”

Majority of Buy-to-Let Lenders Offer Mortgage Products to Limited Companies

Published On: July 29, 2019 at 8:17 am

Author: Em Morley

Categories: Finance News

Tags: mortgages

Mortgages for Business’ latest Buy-to-Let Mortgage Index reveals that, for the first time, more than half (59%) of all buy-to-let mortgage lenders offered products to landlords who use limited companies as borrowing vehicles during Q2 of 2019.

There has been a steady growth in the number of providers serving corporate buy-to-let borrowers, ever since the tapered introduction of new tax rules for landlords began two years ago.

The findings of this research have also been reflected in the total value of buy-to-let mortgage applications completed in the quarter at Mortgages for Business. 52% of these were from landlords using limited companies.

Further to this, Mortgages for Business has highlighted that the Index indicates the gap in pricing between the average buy-to-let mortgage rate (3.1%) and the average rate available to limited companies (3.7%) has diminished by two basis points when compared to the first quarter of the year.

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

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

Lenders’ margins over the cost of funds fell slightly to 0.54% from an average of 0.55% in Q1 2019. This does not appear to be a big drop, but it does demonstrate that lenders are having to really squeeze margins to remain competitive. Low loan-to-value products have been better off, with margins falling below the 0.5% mark (0.48%) for the first time since Mortgages for Business began tracking costs and fees in 2013.

This research also shows an increase in the proportion of fee-free and flat fee-based products, up to 20% and 38% respectively, to the detriment of percentage-based fees, which fell to 40% despite having peaked at 48% at the end of 2018.

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

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

The full index can be viewed on the Mortgages for Business website.