Landlords erring towards 10-year deals
As of April 65% of UK landlords plan to buy at least one further property in the next six months compared to only 55% looking to buy as recently as November 2014.
Just 8% of landlords currently plan to sell any property while 27% do not intend to either grow or reduce the size of their property portfolio over the next six months.
When choosing how to finance borrowing, landlords are also changing their approach with MFB’s research suggesting more than a quarter (26%) would currently prefer a variable rate deal for a new buy-to-let mortgage, up from 23% in November 2014.
Choosing to fix repayments for just a short time period is actually slightly less popular than six months ago. Currently 22% prefer a 2-year fixed rate mortgage, down marginally from 23% in November, while 12% would go for a 3-year fix, down from 15% in November.
Approaching a third of landlords (30%) would still choose the safety of fixing their mortgage repayments for five years, though this is also slightly down on 31% in November.
By contrast, very long term fixes appear to be gaining popularity. One-in-ten landlords (10%) would now choose a 10-year fix, more than the 8% recorded in November.
David Whittaker, managing director at Mortgages for Business, said: “Landlords are better capitalised and now more confident about reinvesting.
“A strong rental market is being driven by tenants moving to make the most of job opportunities, and now gradually starting to earn more too.
“That new surge of demand is putting more upwards pressure on rents, and landlords are only just beginning to supply more homes to let in response.
“On top of this, after the surprise stability of a majority government, landlords will almost certainly see a short-term boost of house price growth – while the threat of damaging regulation has been lifted for at least the next five years.”
The research also revealed that just 30% of landlords said mortgage lenders are doing enough to support property investors. This is even lower than the 36% who felt lenders supported landlords enough in November.
One in five said mortgage lenders should be lending more to landlords, while despite record-low mortgage rates a further 20% feel lenders should reduce rates further.
By far the most common demand for lenders from landlords is to ease lending criteria – an absolute majority of 57% believe landlords should be less rigid in their selection of borrowers. In part, this may be due to the profusion of professional landlords, said Whittaker.
Those with no external income above £25,000 per annum now make up a significant 41% of all landlords, but according to many buy-to-let lenders this lack of significant non-rental income disqualifies such professional landlords from certain mortgage products.
Different property types are also a growing aspect of dissatisfaction with some lenders. The vast majority of landlords (91%) owns at least one standard or vanilla buy-to-let property, stable compared to November 2014.
However, a significant minority of 27% now owns at least one house in multiple occupation, 31% own at least one property classified as a multi-unit freehold block, and more than one in four (26%) owns a semi-commercial property.
Whittaker said: “Buy-to-let mortgage lending is a relatively new aspect of finance, only really defined in its modern form for a couple of decades. But as the financial world evolves certain safe-guards tend to be proven ineffective or irrelevant – and the same is true for buy-to-let.
“For example, it is hard to prove who is on average the better borrower: a professional landlord with three properties but a minimal external income, or a part-time landlord with one investment property but a well-paid job.
“Lenders are still adapting and improving their models for these things. But property investors are understandably annoyed when their personal circumstances aren’t taken into account, and good lenders won’t want to avoid too many borrowers unnecessarily.”