The Buy to let Market surges.
So far this year, the UK has seen a surge in house buying activity by landlords.
The strengthening of the buy to let market has come amidst a backdrop of the home buyers market hitting its lowest levels for 27 years. Read more
A Buy To Let Sourcing Tool.
Over the last few years, as the property market as a whole has suffered the devastating affects of the credit crunch investors and brokers alike have been crying out for innovation.
The buy to let arena was hit particularly hard as some of the biggest names in the market were forced to retreat. Read more
Buy to Let Lenders Launch New Mortgage Deals.
Analysis has revealed that the private rented sector has grown by 72 per cent since 2001 and there are now over nine million people in England renting privately.
Buy to let seems to be a popular option for those who would rather grow their wealth through brick and mortar than shares.
Research shows that buy to let applications have soared by around 26 per cent in the past year.
It seems then that landlords are to receive yet another boost as a number of buy to let mortgage providers have launched new deals just recently.
These new launches have come as the number of buy to let loans being taken out is at its highest level in four years.
Around £1 in every £7 lent on mortgages last year went to landlords, which is a total of £16.4 billion.
There maybe a number of reasons for this. Falling house prices in many parts of the country have prompted existing landlords to snap up more properties, while increasing buy to let mortgage competition and rising rents are also encouraging people to enter the market.
Rightmove, the property search website said its recent research has shown that rents are delivering gross yields of around 5.9 per cent.
The Mortgage Works (TMW), a subsidiary of Nationwide Building Society, has launched its lowest ever fixed rate at 2.49 per cent from today and is available to both first time and experienced landlords.
This deal is for those borrowers with a 60 per cent loan to value (LTV) and carries a 2.5 per cent fee. This would mean a £6,250 fee on a £250,000 purchase.
Henry Jordan, managing director of The Mortgage Works, said: “The Mortgage Works is now offering its lowest ever buy to let fixed rate. These changes further demonstrate our steadfast commitment to the buy to let sector, with landlords being able to secure market leading headline rates across all of our loan to value tiers up to 80 per cent.”
Landlord Centre, the online buy to let mortgage specialist, has also launched two new exclusive buy to let mortgages.
The first, from Melton Mowbray Building Society, is a 2.55 per cent fixed rate until September 2015 with a £2,495 completion fee.
The second is Hinckley & Rugby Building Society with a 2.55 per cent two year discount mortgage with a two per cent completion fee. Both are available up to 60 per cent loan to value (LTV).
Andy Young, chief executive at Landlord Centre, said: “These products are a great option for landlord clients with larger deposits or existing equity in their buy to let properties.”
Mortgage Trust, the specialist buy to let lender and sister lender of Paragon Mortgages , is also now offering a 2.99 per cent two year fixed rate at 75 per cent loan to value (LTV), with a 3 per cent fee, and a 4.15 per cent at the same loan to value ( LTV) with free valuation but with a flat fee of £950.
So in conclusion, it therefore appears that the buy to let mortgage market is continuing to perform well in 2013.
Buy to Let Lending Increases.
Data shows that buy to let lending has been far and away the strongest sector of the mortgage market since overall lending bottomed-out in 2010.
It seems that the buy to let industry is experiencing something of a resurgence in 2013. Lower house prices, rising rental prices and more competitive mortgage deals are proving tempting to prospective landlords; particularly first-time landlords.
According to recent figures from buy to let mortgage lender Paragon show that 22 per cent of recent buy to let business was from first time landlords, thus meaning that more individuals and families are investing in buy to let property.
John Heron, director of mortgages at Paragon, a buy to let mortgage lender, says “We are continuing to see growth in the buy to let market as demand from landlords increases, tenant demand remains strong and levels of optimism stay high.”
David Whittaker, managing director of Mortgages for Business, a specialist buy to let mortgage broker, said “The flow of first time buyers is still barely a trickle, which is sending the excess demand directly into the rental sector and keeping yields high for buy to let investors.”
Some industry experts feel that at the moment the market is still skewed towards the buy to let landlord.
According to the Council of Mortgage Lenders (CML) but to let landlords were granted £4.2 billion across 33,500 new mortgage loans in the first quarter of this year.
By then end of March 2013 buy to let mortgages accounted for 13.4 per cent of total mortgage lending within the UK.
However, almost half of this gross borrowing was for remortgaging, rather than new acquisitions.
Recent research has revealed that buy to let mortgage applications have soared by 26 per cent in the past year as landlords seek to take advantage of the “perfect conditions” which have been created by low interest rates and state subsidised lending.
Ray Boulger, senior technical manager at John Charcol, a mortgage broker adds: “Confidence in the buy to let market appears to be gaining more traction as a result of ongoing falls in mortgage rates coupled with steady or increasing rental values.”
It appears then that the funding for lending scheme, has helped the buy to let sector by loosening the supply of credit to lenders who are then passing the savings on to investors.
Danny Gabay, a director of Fathom Consulting, has recently claimed that the funding for lending scheme is contributing to growth in “the buy-to-let sector at the expense of first time buyers”.
Therefore with so many low mortgage rates on offer at the moment it is no wonder that buy to let remains a tempting option to investors. However, it is important to remember that there are no guarantees when it comes to buy to let.
It is worth remembering that investing in property can be in some ways riskier than investing in shares as consumers can not simply sell up and walk away whenever they wish too.
Retirees Become Landlords.
In the wake of the financial crisis pensions and savings have taken a heavy blow and therefore many retirees are no longer finding these sources of income adequate to sustain a reasonable retirement income.
According to the National Association of Pension Funds, 48 per cent of all current workers are now planning to work beyond the state pension age as they simply can not afford to retire. Read more
Smaller Properties Provide Better Rental Yields.
Many reports have revealed that more people now rent than have done over the previous years, this is largely due to a shortage of supply and people unable to get there feet on to the property ladder.
New analysis shows that the cost of renting has rocketed 4 times faster than wages over the past year to a new all time high, in London renting costs have rocketed 8 times faster.
The HomeLet rental index shows that the average cost of renting property in the UK’s private rented sector increased by 3.3 per cent during the first quarter of 2013.
In contrast, the average amount working tenants earn in a year has only increased by a minimal 0.8 per cent over the same period.
According to recent data published by UK lettings agent Countrywide, properties with just one or two bedrooms now provide the highest rental returns for buy to let landlords.
Figures have revealed then that two bedroom properties provide a 6.4 per cent yield while three bedroom properties give a 6.3 per cent yield.
As many young professional couples have been priced out of the property market many have therefore looked for one bedroom flats to rent. So it appears that with the number of renters continuing to rise, flats to let out are now becoming one of property’s few growth areas.
Therefore rental yields on one bedroom properties have increased the most. For example a one bedroom flat in Nottingham now provides a rental yield of a whopping 6.9 per cent.
Some experts believe that this is a long term trend which is caused by a simple supply and demand situation.
Nick Dunning, commercial director at Countrywide, says this trend may be due tot he fact that “with lots of people working away from home, they need to rent smaller properties where the work is”.
Many estate agents have also commented that at the moment there is high demand for smaller properties and they have reported that there can be up to six or seven tenants for each smaller property on the rental market.
So despite larger properties achieving greater rents, it seems that it is smaller properties that have seen rents rise the most.
Figures have shown that one and two bedroom properties have seen a 3.3 per cent year on year increase in rents compared to three bedroom properties who saw a rise of just 2.3 per cent and a rise of 0.3 per cent was seen on four bedroom properties.
Henry Knight, managing director at Springtide Capital, an independent mortgage broking firm, added “investors are more likely to realise a greater return on a smaller property in terms of an overall investment”.
So in conclusion with rents continually rising, arrears falling and some significantly improved buy to let mortgage products now coming on to the market, all these new findings are very encouraging, especially for investors who are looking to start or expand their property portfolio this coming year.
All in all it seems then that the ‘stars are aligning once again for the buy to let investor’, especially those who have smaller properties.
Buy to Let lenders Restricts Mortgages for those with Tenants on Housing Benefits.
According to recent government figures there are around 3.8 million households in private rented accommodation, 26 per cent of 982,000 households receive housing benefits.
The National landlords Association (NLA) head of policy, Chris Norris, says “there is a huge market for tenants in receipt of local housing allowance and if the private rented sector does not help to support housing provision, many tenants may be left homeless”. Read more
Should Building Societies Lend to Landlords?
The number of lenders offering buy to let loans has increased from 46 in 2010 to 69 in 2013, according to Moneyfacts.co.uk.
However, it seems that despite the number of lenders growing slowly over the past few years professional landlords still face limited buy to let mortgage options.
Building societies were originally established to house local communities, and the sector still advocate that they have a keen interest in supporting communities which offer a choice of different forms of housing.
Building societies began by providing homes for its members, but it now seems that they help landlords to snap up properties such as terraced houses which were traditionally bought by first time buyers.
Some experts believe that in the current climate, for some people renting is a choice rather than a necessity.
Tracie Pearce, head of pricing at Nationwide building society, suggests “we have seen the landlord market start to grow. As a modern mutual, we see our role as one of enabling people to have a ‘home of their own’. For some that might mean they rent”.
However, in reality only a very few people choose to rent over the long term, the rest are more accurately described as “trapped”.
Building societies are mutual organisations that are controlled by their members, therefore many people feel that they should really only help in home ownership and many people looking in to moving their accounts are keen to put their money in to building societies that only lend to owner occupiers rather than funding landlords investments.
Patrick Collinson, the Guardian Money editor, argues that “for every property bought by a buy to let investor, one disappears off the radar as far as first time buyers are concerned. Furthermore, the buy to let purchaser is sentencing someone else to renting”.
The Building Societies Association (BSA) has revealed that virtually all its members offer buy to let mortgages.
Therefore there is now growing concern that buy to let lending is estranging the people they originally sought to help.
Like any other organisation, building societies are interested in the bottom line, so it is not difficult to understand why these lenders are keen to offer buy to let loans to landlords. These particular loans will usually earn the society a higher fee than loans to say first time buyers and they are also regarded as lower risk.
A recent study of mortgage data has shown that banks and building societies are lending more money to landlords than to ordinary home owners.
Figures from the Council of Mortgage Lenders (CML) suggested that for every £1 of net lending to potential home owners, landlords are lent £1.11.
This therefore is the latest sign of Britain’s dysfunctional housing market in which buy to let purchasers are increasing their mortgage borrowing at a record rate.
This news all appears to add to the despair of many first time buyers, many of whom now fear they will never be able to own their own home.
Landlords to Make Properties More Energy Efficient.
According to the English housing survey 11.4 per cent of homes in the private rented sector in 2011 had the lowest energy ratings of F or G. This equates to 670,000 homes, more than a fifth of the total 32 million currently in the private rented sector.
It seems that in part the poor energy efficiency scores of many of the privately let homes reflects a relative lack of basic insulation. A recent report revealed that more than 12 per cent of properties in this particular sector had no double glazing.
Experts believe that this problem is due to the fact that over half of all private rented homes were built before 1944, meaning they are often cold, expensive to heat and have traditional solid walls.
A lot of rented properties are therefore old, drafty buildings with thin windows which ‘rattle and whistle with any strong wind’. This can make putting the heat on like pouring a load of cash down the drain.
Chris Hulme, the Energy and Climate Change secretary, has therefore set out radical plans to upgrade rented homes in the country over the next decade.
A new law introduced by the government which takes effect from 2018 will make it an offence to let out any property with an energy efficiency rating of F or G.
Tenants will also be able to demand improvements to the insulation of their homes from 2016.
However, this could mean that one in ten homes will be unlettable in just five years time that is unless landlords take steps to improve their properties energy efficiency.
This new law will mean that no longer will landlords be able to give their tenants the cold shoulder when they demand that steps are taken to make their home a bit warmer.
In line with this new law the National Landlords Association (NLA) has launched a scheme to help investors to make energy efficiency improvements to their properties. It is based on the governments new Green Deal, under which energy efficiency measures are paid for by a loan that is repaid via a supplement on the property’s electricity bill.
This can be a win win situation as landlords get home improvements without upfront costs and tenants have warmer homes to live in, neither needs to be out of pocket or cold!
David Weatherall, housing strategy manager at the Energy Saving Trust, says “landlords should act now to make improvements rather than waiting until 2017 when the same funding might not be in place”.
The chairman of the National Landlords Association (NLA), David Salusbury, states that “our research shows that many landlords are keen to take advantage of the Green Deal, a third of landlords are not yet aware of the initiative. Furthermore, it is imperative that landlords future-proof their properties and their investments”.
The government has made it very clear that there will be consequences for those who do not voluntarily improve the energy efficiency of their properties by a specific time. Time will only tell how this will pan out in the future.
Buy to Let Mortgage Rates.
Statistics recently released have revealed that last year £16.4 billion was lent to buy to let investors. This figure was 19 per cent higher than the £13.8 billion advanced in 2011.
These figures do show that there is still continued growth within this particular sector. Read more