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Landlords remortgage at twice rate of new purchases
Remortgaging now accounts for
two-thirds of all buy-to-let mortgage
transactions, according to the latest
Mortgages for Business Complex
Buy to Let Index.
In the first quarter of 2015, 66% of
mortgages against standard or ‘vanilla’
buy-to-let property were remortgaging
loans, leaving just 34% of buy-to-let
mortgages written in Q1 for the purposes
of purchasing new properties. Previously,
remortgaging represented only 62% of
vanilla buy-to-let mortgages as little as
three months ago, in Q4 2014.
For houses in multiple occupation
(HMOs), remortgaging is now an even
higher proportion, standing at 73% of
HMO mortgages in Q1, up from 70%
in Q4 2014.
Moreover, the same trend is even more
pronounced for multi-unit freehold
blocks (MUFBs) with remortgaging
representing 89% of mortgages in Q1,
compared to just 42% in the final quarter
of 2014. Semi-commercial property
witnessed the same trend but with a
more gradual change, from 86% to 87%
of new loans agreed for remortgaging.
As landlords have remortgaged in
increasing numbers, their average loanto-value ratios (LTVs) have crept slightly
higher over the course of the last three
months. For ‘vanilla’ buy-to-let, the
average LTV now stands at 66% in Q1
2015, compared to 63% in Q4 2014.
Landlords of HMOs have seen loanto-value ratios rise to 70%, up from an
average of 64% LTV in Q4 2014. Likewise,
MUFB properties are now mortgaged to an
average of 67% of the property value, up
from 64% LTV in the final quarter of 2014.
Semi-commercial properties saw a more
gradual shift, though for these landlords
the average LTV also rose from 64% in the
previous quarter to 65% in Q1 2015.
David Whittaker, Managing Director
of Mortgages for Business, comments:
“Record low mortgage rates are driving
wave upon wave of landlords to reassess
their finances. A great deal agreed last
year may be uncompetitive by today’s
standards. So this stampede is completely
rational – it represents a charge by
landlords to make the most of an
unprecedented economic situation.
“Remortgaging is often done for the
purposes of raising extra capital, and this
is clearly reflected in higher loan-to-value
ratios. However, this is by no means an
unwelcome trend – and could in turn
open the door to more new purchases and
investment by landlords.
“Rental yields are healthy and there is a
gathering demand from an increasingly
prosperous base of tenants. So the
fundamentals of the rental market –
and of landlords’ finances – are still
extremely solid.”
For standard ‘vanilla’ buy-to-let
property, gross yields have now risen
to 6.4% in Q1, up from 6.3% in the last
quarter of 2014. On a similar note, gross
rental yields on HMOs have now broken
through the ten per cent mark to stand at
10.4% in Q1, up from 9.0% in Q4.
Semi-commercial property has also
seen yields grow, from 6.4% in Q4, to 7.5%
in Q1 2015. However, for MUFB properties
the average rental yield has dipped to just
6.3% in the first quarter, down from 9.3%
in Q4 last year.
David Whittaker concludes, “Landlords
are reporting a buoyant rental market,
driven in large part by a resurgent jobs
market – and now even more encouraging
signs on wages.
“In turn, this will stimulate many landlords
to invest further, although one major holdup in an other ݥ͔