For standard buy-to-let investment – flats and houses rented to families and professionals – there is a wide selection of lenders and products currently available. The level of competition in the marketplace and low bank interest rates has resulted in some good deals being offered to landlords.
Lenders have also started providing special deals to landlords which are available exclusively through selected brokers only. These products are often highly competitive, designed for specific customer lending requirements and may only be offered for a limited time. The provider of Property Hawk Mortgages has been chosen by a number of lenders to distribute this type of targeted product and currently has a range of special deals on offer. These include buy-to-let mortgages with Hinckley & Rugby Building Society, Leeds Building Society, Accord Mortgages, Kent Reliance, Skipton Building Society and Mortgage Trust.
For landlords who would like to release equity from existing buy-to-let properties to expand their portfolios or move on to a more competitive interest rate, there is a good choice of remortgage products available. There is a wide selection of fixed and variable rates on offer, including deals with incentives such as free valuations and no legal fees. With high rental yields and strong tenant demand, it could be a good time for landlords to consider expanding their portfolios with further buy-to-let properties.
Professional landlords often consider houses in multiple occupation (HMOs) as viable investment properties and with good reason. Property Hawk Mortgages’ latest
Property Investor Profile showed that terraced houses with student tenants (often HMO properties) command the highest average rental yields – 8.23% compared with 6.60% for an average buy-to-let property. Purchasing an HMO property can make real financial sense for landlords.
For larger HMO properties, Paragon Mortgages has a dedicated range of products offering a degree of flexibility on up to 20 units. Products are available up to 75% LTV.
Kent Reliance is perhaps the most innovative lender in the HMO segment, also offering a multi-let range of products. Kent Reliance is currently the only lender in the buy-to-let mortgage market offering loans up to 85% LTV, and this includes their HMO range. So for landlords looking for a higher gearing, Kent Reliance is the go-to lender. It will consider properties with up to 8 bedrooms and with multiple ASTs, although there is a limitation on the minimum property value of £250,000.
The outlook for 2013 is positive for residential property investors as it is expected that the buy-to-let sector will remain in good shape during the next year. Average rents are still strong (over £1000 per month according the PTM’s Property Investor Profile for Q3 2012) and tenant demand is high. Good rental income and flat house prices means that landlords are currently experiencing excellent average rental yields (6.60% during Q3 2012 according to the PTM Profile) and this is likely to continue in 2013.
However, investors looking for a new buy-to-let property should carry out their research carefully first, as rental yields can vary considerably according to property type, tenant type and region. For example the PTM Profile shows that terraced houses provide the highest rental yields at 7.28%. Students in terraced houses on average provide a rental yield of 8.34%. Given that the average rental yield overall was 6.60%, landlords may look to the student segment of the rental market to maximise their returns. As with HMO properties, Paragon Mortgages and Kent Reliance are the leading lenders for student lets.
It is likely that the general availability of buy-to-let finance will continue to improve over the next few years. We are expecting total new buy-to-let lending in the UK to be circa £15.5bn in 2012 and this could increase to as much as £18bn during 2013, perhaps reaching £20bn by 2015.
It is possible that some new lenders will enter the buy-to-let mortgage market in 2013, bringing more competition and greater product innovation. Also, the government ‘funding for lending’ initiative could give banks and building societies further scope to provide more buy-to-let mortgages as their total overall level of lending increases.
High tenant demand, affordable properties and good rental yields means that buy-to-let property is currently an attractive prospect for landlords looking for a medium to long term investment. The availability for buy-to-let finance is improving and the general outlook for residential property investors in 2013 is encouraging.
Tel: 029 2069 5446
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