Its finding for Q3 show average fixed rates have gone down, LTV’s increasing and tracker rates remaining the most popular choice for landlords.
Andy Young, chief executive of TBMC, said: “The buy-to-let mortgage market has continued to improve throughout 2012 with more lenders and products now available for brokers and their landlord clients to choose from.
“This has led to greater competition in the market and there are currently some excellent deals available. There has also been some softening of criteria by some lenders, increased LTVs and a lowering of rates.
“At TBMC, we now have over 400 buy-to-let mortgage schemes available, providing a comprehensive range of products to suit a wide variety of situations. These include purchases, remortgages, HMOs, limited companies, light refurbishments, new builds, expats, first time landlords and more. These positive developments are good news for existing landlords looking to develop their portfolios or those considering buy-to-let investment for the first time.”
In terms of the type of product that landlords are choosing, there is a clear preference for variable rates over fixed rates. During Q3 2012, 60% of buy-to-let applications received by TBMC were for variable rates compared with 40% for fixed rates. The average fixed rate chosen during this period fell from 5.06% to 4.88% and the average variable rate rose from 4.10% to 4.40%.
Young added: “With variable rates still cheaper than fixed rate products, more landlords are opting for lower initial rates, which may reflect a growing consensus that interest rates will continue to remain low for some time to come.
“The increase in the average variable rate can be attributed to the availability of higher LTV products which are also priced higher.
“In terms of the split between purchases and remortgages, it was absolutely even during Q3 with 50% of applications received for each type. This demonstrates the keen appetite amongst landlords looking to take advantage of the excellent remortgage deals available to release equity from their existing properties, and those looking to expand their portfolios with the purchase of additional properties.”
As the buy-to-let mortgage market has expanded more lenders are now offering higher loan-to-value (LTV) products. There is a wide range of rates available up to 80% LTV and Kent Reliance still offers 85% LTV mortgages in its core range and for HMOs, limited companies and student lets.
Young said: “The provision of higher LTV finance has, unsurprisingly, resulted in a noticeable rise in the average LTV for buy-to-let loan offers received by TBMC during quarter three (72.63% compared with 67.30% in the previous quarter).”
Average rents have stayed strong during 2012 as tenant demand remains high and the average monthly income was again over £1000 a month during quarter three.
But Young said: “However, there is always a wide variation in rental income depending on property and tenant type. According to the Index, student tenants provide the highest rental yields for tenant type (often from HMO properties) with an average yield of 8.23%.
Terraced houses provide the highest rental yields for property type at 7.28%. Students in terraced houses on average provide a rental yield of 8.34%. Given that the average rental yield overall was 6.60%, landlords may look to the student segment of the rental market to maximise their returns.”