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Buy-to-let LTVs remain high in Q2

Robyn Hall

August 12, 2013

LTVs dropped marginally from 74.84% in quarter one to 73.91% to in quarter two which the specialist buy-to-let broker said was due to greater choice at the top end of the LTV curve.

Andy Young, chief executive of TBMC, said: “As the appetite to lend in the buy-to-let market has increased so has the average loan-to-value for mortgage offers received by TBMC.

“This is due to the excellent range of buy-to-let mortgage deals now available at 75% LTV and above making up almost half of the total product offering at TBMC.

“Higher LTVs enable landlords to employ a higher gearing in their residential property investments and clearly many are opting to do so.”

Most lenders now offer products up to 75% LTV and with more choice emerging in the 80% LTV bracket. Precise, Leeds Building Society, Kent Reliance, Aldermore and The Mortgage Works all offer 80% LTV products while Kent Reliance is the only lender offering buy-to-let loans up to 85% LTV.

Competition between lenders such as The Mortgage Works, Santander, Principality, Mortgage Trust and Hinckley & Rugby, produced a raft of rates below 3%.

Meanwhile the average fixed rate dropped from 4.48% to 4.15% compared to the average variable rate which dropped from 4.68% to 4.35%, the findings revealed.

Young said: “Since the beginning of the year average fixed rates, for TBMC offers, have been lower than variable rates with attractive rates available across all LTV bandings.

“These fixed rate deals have been very popular with landlords and 53% of offers received by TBMC during quarter two 2013 were for fixed rates, up from 44% in quarter one.”

Young said the sustained fall in fixed rates over the last six months may be attributed to the impact of low swap rates and UK fiscal measures.

But he added: “The significant increase in swaps at the end of June may affect this trend over the rest of the year with some industry pundits asserting that fixed rates may have bottomed out.”

The buy-to-let remortgage market maintains in good shape with 49% of all applications received by TBMC to release equity within existing portfolios.

Young said: “With such a wide choice of competitive products many landlords are seizing the opportunity to remortgage existing properties to release equity possibly to fund further purchases.”

Lenders including Mortgage Trust, Skipton Building Society, Leeds Building Society and Godiva are making remortgage deals more attractive by offering incentives such as a free valuation and free legals.

Terraced houses and flats continued to be the most popular investment accounting for 60% of buy-to-let properties being sought by landlords.

This is to meet the high demand from families and professionals who collectively make up over 90% of the tenants for buy-to-let properties financed through TBMC.

And London remained the most popular area for residential investment properties during quarter two 2013 accounting for 17% of TBMC’s business.

Other popular areas include Brighton (3%), Sheffield (3%) and Birmingham (2.5%), although none of these generated the highest yields.

Higher than average yields were reported in Leeds (7.66%), Nottingham (7.03%) and Southend-on-Sea (7.08%).

Young said: “Now is an excellent time to invest in private rental properties with average rental yields at over 6% and this sector of the mortgage market provides an excellent opportunity for brokers to increase their revenue.”


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