Buy-to-let 'even more attractive' as mortgage rates hit record lows

Lenders are slashing buy-to-let rates and relaxing lending terms as the 'mortgage rate war' spreads from mainstream to buy-to-let 

The sudden plunge in mainstream mortgage rates - which has seen a number of lenders offer 10-year fixed rate loans at less than 3pc, and sparked a widespread "rate war" - is spreading to buy-to-let.

Specialist landlord broker Mortgages for Business said there were now more than 800 buy-to-let loans available, a number that has grown by more than 100 in three months.

As in the owner-occupier market, borrowers with bigger deposits fare best, but borrowing costs are falling for almost all categories of landlord.

A 40pc deposit and good credit history could garner a landlord a market-leading five-year deal at 4.2pc.

The best two-year landlord loans charge around 3.5pc.

These are substantially lower than even six months ago. Brokers point out that with rents remaining stable or rising, these new, lower-rate mortgage deals offer landlords the opportunity to boost returns.

Moneyfacts, the rates analyst, said the average of all fixed rate loans currently available was now just 3.82pc, which it claims is the lowest it has ever recorded. Variable-rate buy-to-let loans average 3.6pc (see graph, below).

It is also becoming easier to obtain loans with smaller deposits, and lenders are looking more kindly on landlords wanting to refurbish properties or what want to buy properties to let to multiple tenants as HMOs or "houses of multiple occupation".

Sylvia Waycot of Moneyfacts said: “When you consider dire savings rates, it is hardly surprising that buy-to-let is proving popular with investors, and this is likely to increase once new pension rules come into force in April.

"Having had several years of the bank door being firmly shut to only the richest of borrowers, doors appear to not only be open but actively entice you in off the street with offers of fantastic rates.”

Lenders do still apply strict lending limits based around the number of properties a landlord owns, the level of rent they generate and in some cases landlords' other sources of income.

Mark Harris of mortgage broker SPF Private Clients said: "With lenders aggressively competing for business, there are more buy-to-let mortgages available with increasingly relaxed criteria and lower rates - all providing a further boost to an already-popular sector.

"The best rates remain available to those with the biggest deposits, while landlords are increasingly opting for fixed-rate mortgages to provide more certainty and help with budgeting.

"While it is easier to get into buy-to-let now then it was five years ago, it is still harder than it was before the downturn. Lenders have learnt their lesson and are being more cautious."

Source: www.telegraph.co.uk

Buy-to-let investor numbers up 8% last year

The total number of buy-to-let investors in the UK has risen 8 per cent in the last year to 1.63m last year, according to lettings agent Ludlow Thompson.

The net income of these investors reached £13.1bn in 2012 to 2013, again 8 per cent more than the £12.1bn net income in 2011 to 2012.

Record low interest rates on bank deposits and government bonds mean the sector is continuing to attract new money, according to the agent, which suggested that 5 to 6 per cent yields on investment properties remain achievable in some parts of London.

Capital growth for residential property was more than 7 per cent in 2014 and 16 per cent for property in London, compared with the FTSE 100 increasing by only 0.7 per cent in a year.

Stephen Ludlow, chairman at Ludlow Thompson, commented that recent regulatory changes to the mortgage market are making it harder for potential first-time buyers to acquire mortgages – meaning they stay in the rental market for longer.

The firm stated that the popularity of buy-to-let will continue to increase this year, with the reforms to stamp duty announced in the Autumn Statement benefiting investors.

Under the new rules, there will be no tax payable for houses worth less than £125,000, 2 per cent on the portion of any value above this and up to £250,000, 5 per cent on the next portion up to £925,000, 10 per cent up to £1.5m, and 12 per cent thereafter.

“Also, pension changes announced last year, should allow potential investors to use these funds for a property purchase, offering far greater yields than pension funds,” added Mr Ludlow.

At the end of last month buy-to-let specialist Paragon posted an operating profit of £30.9m for the last quarter - a 14.9 per cent increase from the end of 2013 - driven by buy-to-let completions of £222.1m, an increase of 58.4 per cent compared with the same period in the last financial year.

Source: www.ftadviser.com

New high property investors branch out into regions

London continued its three-year reign as the most active market in the world for property in 2014

British landmarks, office blocks and shopping centres attracted a record £65bn of investment in 2014, driven by a 70pc rise in the regions.

Overseas investors including high-net worth individuals and sovereign wealth funds have been attracted by the low interest rate environment to plough money into property at a record rate, research from the real estate group JLL found.

London continued its three-year reign as the most active market in the world for property, with domestic and overseas investors spending £27.5bn.

However, it was the new-found popularity of areas such as the South West, the West Midlands and the South East that took UK property investment to a 16pc rise on 2013 levels. Investors sunk £28bn into the regions.

“Overseas buyers stop off in London first before going on to New York,” said Chris Ireland, at JLL. “They then go on to either buy in other European cities or they turn to the UK regions which offer good value.”

Source: www.telegraph.co.uk

UK house prices jump unexpectedly in January - Halifax

(Reuters) - British house prices jumped unexpectedly last month, recording their biggest rise since May 2014, but mortgage lender Halifax said it still expected the overall pace of house price rises to slow this year.

Halifax said that house prices rose 2.0 percent in January from the month before, up from a 1.1 percent increase in December and far outstripping the 0.1 percent average increase forecast in a Reuters poll. ECONGB

Prices in the three months to January were 8.5 percent higher than a year earlier, compared with a 7.8 percent annual increase in the three months to December.

The figures released on Thursday contrast with most other recent housing market data, such as last month's survey by the Royal Institution of Chartered Surveyors, which pointed to the slowest price growth since May 2013.

Britain's housing market has slowed since the middle of last year due to tighter regulation of mortgage lending and buyers' concerns that prices were increasing far faster than wages, though Bank of England data showed mortgage approvals picked up in December for the first time since June.

"These improvements may indicate that the recent declines in mortgage rates, the reform of stamp duty and the first increases in real earnings for several years are providing a modest boost to the market," Halifax housing economist Martin Ellis said.

However, he added that January was also a month when house prices could be particularly volatile due to low volumes, and stuck with a forecast for house price growth to slow over 2015 as a whole.

Howard Archer, chief UK economist at consultants IHS Global Insight, also said he did not think the Halifax data pointed to a significant pick-up in the housing market.

"We have little doubt that the spike in house prices in January reported by the Halifax is an outlier," he said. "Nevertheless we do suspect that the weakness in housing market activity may be bottoming out and we see activity picking up to a limited extent in 2015."

Source: uk.reuters.com

UK landlords can choose from record number of buy to let mortgages

Record number of buy to let mortgages are now available in the UK with landlords able to choose from 817 different products, up 16% quarter on quarter, the latest index shows.


Lower LTV fixed rate mortgages are now cheaper than equivalent tracker products, even before rates rise, according to the latest Buy to Let Mortgage Costs Index from Mortgages for Business.

Mortgage charges have fallen further for lower LTVs while landlords at higher LTVs pay extra fees. However, the cheapest mortgage rates and lowest fees have been reserved for low loan to value ratios.

‘This unprecedented pick up reflects the huge increase in demand as well as the wider importance of the buy to let industry,’ said David Whittaker, managing director at Mortgages for Business.

‘Looking at total lending in 2014 the trend is clear. For a second consecutive year the value of the buy to let market grew by almost a quarter. We anticipate further growth in 2015 but at a slower rate as the market takes an inevitable breather after such a huge sustained spurt,’ he added.

The research suggests that fixed rate mortgages are proving to be better value than their respective tracker counterparts, particularly for lower loan to value borrowers. Low LTV mortgages now outperform their tracker equivalents at two, three and five year periods.

Likewise, at medium LTVs, the costs for a two year fixed rate is 4.4% compared with 4.7% for the tracker equivalent, while for three year products the costs are the same and only 0.3% higher than the tracker products for five years.

Even for fixed rate high LTV mortgages, the current cost of borrowing is only marginally higher than tracker products. To fix for five years at a high LTV is just 0.4% more than the corresponding tracker.

Only one in a hundred landlords now opts for a one year initial mortgage term. More widely, the popularity of short term mortgages continues to wane as 52% opted for a two year deal, down from 57% six months ago despite the very attractive two year rates on offer.

By contrast longer term mortgages are growing in popularity, with the proportion choosing five year mortgages rising from 15% in the second quarter to 18% in the fourth quarter.

‘It’s astounding that fixed rate mortgages are already better value than their respective tracker counterparts. Again the real advantage is for the ‘safest’ landlords with the lowest LTV loans. But even though tracker products are a little bit cheaper at higher LTVs, in these cases too it soon won’t be enough to compensate for the likely increase in cost of trackers when rates inevitably rise,’ said Whittaker.

‘If customers are paying only a few percentage points above the negligible Bank base rate, then if this jumps it could mean a huge proportional increase in future costs. Capital markets are still reeling from tumbling inflation and a dovish outlook from the Bank of England that no one would have predicted six months ago,’ he explained.

‘This is only just starting to have its full impact on the mortgage market and the finances of landlords. Yet it’s already clear that landlords haven’t completely abandoned caution and are beginning to look at longer fixes and planning for higher rates within the next couple of years,’ he added.

The research also shows that the effect of product charges on the cost of borrowing has improved for low and medium LTV mortgages. At the lowest LTVs, the effect of charges have now fallen to 0.39% from 0.62% in the first quarter of 2013. Medium LTV borrowers have also benefited with effective charges dropping to 0.53% in the fourth quarter of 2014 from 0.70% at the beginning of 2013.

Overall, the effect of charges levied on mortgage products across all LTVs has dropped further from 0.54% in the third quarter to 0.52% at the end of 2014. However by contrast, charges for high LTVs have risen from 0.84% in the third quarter of 2014 to 0.88% in the fourth quarter.

‘These trends indicate that lenders prefer the safest borrowers who now have a vast array of competitive products to choose from. However, with rates bound to rise soon these kind of pricings won’t last for ever and we would advise borrowers to take advantage of the fixed rate deals on offer in 2015,’ Whittaker concluded.

Source: www.propertywire.com

UK Buy-to-Let Occupancy Rates Highest Ever in Q4 2014

The UK’s buy-to-let property investors enjoyed a very strong year last year in terms of average occupancy rates with an average of 2.6 weeks without a tenant over the year reached in the fourth quarter.

The quarterly survey, conducted by buy-to-let mortgage specialists Paragon Mortgages for the past 13 years, indicated continued strength in the rental market last year.

UK buy-to-let tenancy has always been strong, with an average of 2.6 to 3 weeks of vacancy per 12 months recorded since Paragon began its survey in 2002.

Even during the economic crises vacancy levels peaked at 3.5 weeks per year on average. Nonetheless, a result close to the record low of 2.5 weeks of average vacancy set in 2002 will be well received news by property investors across the length and breadth of the UK.

Source: www.invezz.com

House prices up 6.8% since January 2014

Properties are exchanging hands for 6.8 per cent more this month than a year ago.
House prices are now 2.4 per cent higher than before the 2008 economic crash - with the average home worth £188,446.


Separate Land Registry figures said prices in England and Wales in the year to December rose 7 per cent, down from 7.2 per cent in November and the fourth month in a row that the annual rate has fallen.

Both sets of figures show that average house prices have remained static since last summer.

The Nationwide said the reasons for the slowdown in the housing market since then 'remain unclear', as the economic background has in fact continued to improve.

But it predicted that house prices would take off again once people started to feel the benfit of pay rises.

Nationwide's chief economist Robert Gardner said the number of mortgages approved had been about 20 per cent below last year - and surveyors continued to report subdued levels of new buyer enquiries.

But Mr Gardner said the reasons for the continued slowdown were unclear given the fall in unemployment, wages that have started to rise faster than inflation and high levels of consumer confidence which have helped fuel strong retail sales growth.

'If the economic backdrop continues to improve as we and most forecasters expect, activity in the housing market is likely to regain momentum in the months ahead,' he said.

Prices were also likely to be supported by the long-term shortage of new houses coming onto the market.

'It is encouraging that the number of new homes built in England was up 8 percent in the year to the third quarter of 2014. However, this is still 34 percent below pre-crisis levels and little over half the expected rate of household formation in the years ahead,' Gardner said.

The Land Registry data showed that London house prices ended the year up by 16.3 per cent, at an average of £464,936.

In nine boroughs prices were up by more than a fifth over the year, and in every part of the capital rises were in double digits.

The biggest leap in prices was in the north-east borough of Waltham Forest, which includes Walthamstow, which saw prices increase by 25.1 per cent to an average of £368,000.

Kensington & Chelsea recorded the lowest level of growth within London, at 11.5 per cent over the year, but the average price was still a lofty £1.3million.

Source: www.dailymail.co.uk