HMO investors borrow at higher LTVs

Ryan Bembridge

July 12, 2016

HMO investors are borrowing more to take advantage of higher returns, data from Mortgages for Business shows.

The typical HMO loan-to-value rose to 75% loan-to-value in the second quarter of 2016, up from 62% in the first quarter.

HMO yields have averaged just below 10% since 2011, compared to 6.1% for standard buy-to-let.

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David Whittaker, managing director of Mortgages for Business, said: “We now have five years’ worth of data against which investors can benchmark their portfolios.

“Both Vanilla BTL and HMO property offer fairly consistent yields. For the more cautious investor and for those who like a mix of risk within their portfolio, 6.1% average yield on a standard BTL still represents a good return.

“And for the more experienced investor, HMOs certainly perform better than all other types of rental property averaging just below 10% since 2011.”

Since Mortgages for Business started taking data five years ago the average HMO LTV was 69%.

Average yields on multi-units grew to 9.5% in the second quarter, well above the five year average of 7.4%, although the typical LTV was lower at 56%

The typical LTV for semi-commercial property was 60% in the second quarter, the same as the five-year average.

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