Buy-to-let market continuing road to recovery

Nia Williams

May 3, 2011

According to the Index, this increased competition is bringing about new product ranges and greater choice for landlords, as well as better schemes being offered to buy-to-let investors enabling them to borrow more at higher gearings.

TBMC produces the Landlord Profile Tracking Index to track developments in the UK buy-to-let mortgage market. Its findings for Q1 2011 highlight several interesting trends for the sector, including:

• Higher loans amounts offered during the period

• Growing interest in tracker rates

• London is the most popular city for buy-to-let investment followed by Portsmouth, Sheffield and Brighton

• Over 90% of buy-to-let tenants are families or professionals

• Terraced houses and flats are the most popular buy-to-let properties

Commenting, Andy Young, chief executive at TBMC, said: “During Q1 2011 the average loan size for offers received by TBMC was £136,359 up from £130,145 in the previous quarter – an increase of almost 5%. Average loan-to-values (LTVs) also continued to rise during the period, with 49% of mortgage offers made with LTVs of over 70% and the overall average LTV at 66%. This reflects the increase in lenders offering more 75%, 80% and even 85% LTV buy-to-let mortgages.

“During the course of last year fixed rates were a more popular choice by landlords, making up 63% of applications in the last quarter of 2010, with just 37% of applications for variable rates. However, this preference appears to be changing as the Bank of England base rate has remained at its historical low of 0.5% throughout the first quarter of 2011.

“During Q1, 52% of applications were for variable rates, perhaps reflecting opinion that any interest rate changes during the year will be small. There have also been some very attractive discounted rates available via a number of regional building societies, resulting in an influx of applications for these products. Interestingly the average rates chosen during the period increased slightly. The average fixed rate was 5.00% (up 0.24%) and the average variable rate was 4.20% (up 0.13%). However, one set of results is not sufficient to tell whether this is a developing trend or just a minor deviation compared with the previous quarter.

“According to the Index terraced houses (33%) and flats (31%) are the preferred buy-to-let investment properties for landlords in the UK, accounting for over 60% of the mortgage offers received during the last quarter. This is a consistent trend observed since the Index started, together with over 90% of buy-to-let tenants being either families or professionals. These options are clearly the most reliable for a good yield.

“Unsurprisingly, the results of the Index show that London is the most popular location for buy-to-let investment with over 17% of mortgage offers received for properties in the capital city of England, followed by Portsmouth, Sheffield and Brighton. Major cities such as Birmingham, Manchester and Cardiff also show steady buy-to-let property investment.”

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