The number of buy to let mortgage products in the UK reached 521 in the last three months,
with competition leading to better deals for landlords.
According to the latest Mortgages for Business Complex Buy to Let Index new purchases made up a significantly larger proportion of lending in the final quarter of 2013 across all residential property types.
Standard buy to let lending saw the biggest move towards new purchases, with 47 per cent of these plain vanilla mortgages going towards new buy to let properties. This compares to 38 per cent representing new purchases in Q3, and 31 per cent at the beginning of 2013.
More complex properties also formed a growing feature of landlords’ shopping lists. Houses in multiple occupation (HMOs) saw a similar trend to standard deals.
Almost one third (29 per cent) of mortgages against HMOs were for new purchases in the final quarter, compared to 23 per cent for new purchases in Q3 and 20 per cent in Q4 2012.
Larger, multi-unit freehold blocks (MUFBs) saw the same trend, with mortgages for new purchases making up 31 per cent of loans against such properties, compared to 30 per cent in Q3 and 25 per cent at the start of 2013.
There has been a significant fall in remortgage activity over the last six months despite remortgaging still making up the majority of buy to let activity. In the last quarter, 53 per cent of standard buy to let deals were a remortgage – down from 65 per cent in Q2. For HMOs, 71 per cent of BTL activity was a remortgage compared to 84 per cent six months ago. And for loans secured against MUFBs in Q4, 69 per cent were a refinance rather than a purchase – down from 88 per cent in Q2.
Loan-to-value ratios have remained broadly stable. For vanilla buy to let properties there was no change in LTVs for the third month running, standing at 68 per cent once again in Q4. HMOs saw LTVs drop slightly to 70 per cent, from 71 per cent in Q3, and loan to value ratios on semi-commercial property fell from 66 per cent in the previous quarter to 53 per cent in Q4.
The only properties to see higher LTVs in Q4 were larger MUFB blocks, with loan to value ratios averaging 68 per cent compared to 62 per cent in the previous quarter. This is likely due to the increase in average property values among MUFBs causing landlords to require larger LTVs.
David Whittaker, managing director of Mortgages for Business, commented: “At the end of 2013 landlords could choose between more than 500 mortgage products – the figure today now tops 550. But that choice isn’t just delivering cheaper deals – there are now even more imaginative and flexible financing options out there too – many of which offer some of the best yields. With demand for tenancies as strong as ever, landlords are making use of a more buoyant situation to boost their portfolios. As we move into 2014 capital accumulation is accelerating, and joining solid rental income to make buy to let consistently attractive to investors.”
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