Buy-to-let declines as stocks rise

Ramesh Sharma

April 1, 2006

Research conducted by brokerage Hamptons International Mortgages in its Best-Buy Mortgage Tracker Survey has revealed that BTL purchases were down from 13.76 per cent of all business in January 2006 to 9.35 per cent in April 2006.

BTL remortgages have also shown a steep decline from 25.93 per cent to 16.26 per cent in the same period and Jonathan Cornell, technical director at Hamptons, believed the stock market was a big contributing factor towards this decline.

He said: “Buy-to-let purchases are at an annual low as pressure on rental yields and the continued recovery of the stock market means many potential buy-to-let landlords are beginning to seek better returns elsewhere.”

Brian Poole, mortgage planner at AM Ruthven & Associates, agreed: “Although the number of mortgages we are doing is steady, people are taking a punt at the stock market. The trend seems to be that while the market is on the up, people will have a look at shares and I am sure this will continue as long as the market is going up.”

Also revealed in the survey was a rise in the loan-to-values (LTVs) that investors needed to fund their mortgage, with purchasers taking 78.93 per cent LTV in April, compared with 73.89 per cent in January.

The situation was the same for remortgagers, with LTVs of 73.80 per cent this month contrasting with 69.14 per cent at the start of the year.

Mark Alexander, managing director of The Money Centre, commented: “The majority of investors we see go for maximum funding as it is better to have an extra £10,000 rather than reducing outgoings by £45 a month. More clients are finding this out and the Hamptons figures reflect this.”

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