Mortgage Market Update (February)
As a specialist brokerage in buy-to-let, we have decided to keep our mortgage market updates focused more towards the buy-to-let side. We won’t neglect residential altogether if we feel there are certain updates that seem to be important, but we won’t cover it as extensively as we have been in previous updates.
The Mortgage Works have become the first buy-to-let Limited Company lender to offer a complimentary legal service for remortgages. This is a significant and welcoming change as no other lender has offered this before, or are currently doing it. Hopefully this move would encourage other Limited Company buy-to-let lenders to follow suit, however it might not happen so quickly or smoothly as the legal work for Limited Company does tend to be a bit more complicated compared to other transactions.
When it comes to arranging a mortgage for Limited Company buy-to-let, the cost is on average significantly higher than for personally owned buy-to-let. It’s not just the average rate, but the product fees, application fees, valuation fees that come with many Limited Company buy-to-let products. They don’t often tend to come with complimentary legal service or a free valuation that you would find for personally owned BTL remortgages.
Vida Homeloans have relaunched their BTL product range this month with 2 year fixed rates from 2.99% up to 70% LTV and 3.14% up to 75% LTV. As a specialist buy-to-let lender they consider Limited Company SPVs, HMOs and MUBs (Multi Unit Blocks), portfolio landlords and can consider applicants with ‘impaired and improving credit history.’
Foundation Homeloans have reduced their buy-to-let 2 year fixed rates which now start at 2.89%. For many of their buy-to-let rates, they have been reduced by up to 20 basis points for their F1 tier products (primary range).
BM Solutions have announced that with effect from Tuesday 2 March 2021, the following criteria will apply:
•Properties must have a valid EPC and a minimum rating of E or above•Properties with F or G EPC rating are only acceptable where a registered exemption is in place•This criteria applies in England, Northern Ireland, Scotland and Wales•Applies to Buy to Let purchases and remortages, Let to Buy remortgages, and further advances. Product transfers and transfers of equity are exempt.
The EPC rating will be confirmed as part of the property valuation.
We can expect many other lenders to follow suit with similar criteria if they haven’t already.
Accord Mortgages has increaded its maximum aggregate borrowing limited from £1million to £3million. They have also increases the total number of BTL mortgages an application can have to 5 from 3. They’ve reduced their valuation fees for buy-to-let applications so that it is the same as their residential product range which had previously been lower than the BTL product range.
Paragon Bank, specialist buy-to-let lender has expressed its optimism for the coming year by introducing two remortgage only products that offer a £500 cashback, a free mortgage valuation which is available for both personal ownership and those who own the buy-to-let in a limited company. The first is suited to portfolio landlords looking to remortgage on single self-contained properties and has a rate of 3.45 per cent with a product fee of 1.50 per cent.
The second is available on houses in multiple occupation (HMOs) and multi-unit blocks (MUB) at a rate of 3.65 per cent with a product fee is set at two per cent.
As of 25th February, Precise Mortgages are temporarily raising their minimum loan amount for Buy-to-let and Limited Company buy-to-let to £75,000.
The Mortgage Works have released their regional Landlords report for the last quarter of 2020 using data from research company BVA BDRC.
‘Underlying business profitability remains resilient [in Q4 2020], with 88% of landlords making a profitable full time living from their lettings activity. Perceptions of increasing tenant demand continue to recover and are now at a 5-year high of 32%.’ Results based on 846 NRLA members with properties in the UK in Q4 2020.
Following from this, the average landlord’s rental yield in the UK is 5.8%, with a gross rental income of £7,051 per property and an estimated portfolio average of £1.3 million.
41% of those faced rental arrears in the last 12 months, and 34% with void periods in rent in the last 3 months.
Just 7% of those landlords surveyed bought a property in the last 3 months, with the same percentage also selling a property in the last 3 months.
Central London continues to be the UK region experiencing the most ‘pain’, recording the weakest regional performance across a multitude of measures in Q4. Landlords in Central London are least optimistic about the prospects for their own letting business (22% vs. the national average of 35%). A key driver of this is the very low level who perceive that tenant demand is increasing in the area (7%). Additionally 1 in 2 landlords have had a void in the last 3 months, the highest level across all regions. However there are signs of green shoots of recovery, as although average rental yields are the lowest across all regions they improved by 0.4% from Q3, to 5.1%.
Landlords operating in Outer London see expectations for the UK’s financial markets (+16%) and their own letting business (+7%) improve significantly vs. Q3, likely driven by an uplift in rental yields from Q3 (+0.5% to 5.2%). The proportion of landlords who identify increasing levels of tenant demand stands at 18%, over twice the perceived demand in Central London. However a larger proportion experienced a rental arrear (45% vs. 33% in Central London). Additionally profitability stands at 83%, the joint lowest across all regions. Recent buying and selling activity remains slightly below the national average of 7%, with both at 5% in Q4.
Landlords in the West Midlands manage the largest portfolios in the UK, with 12 properties on average. All of the confidence indices are up vs. the preceding quarter, with landlord confidence in the prospects for their own lettings business above the national average at 43% (vs. 35%). This is likely driven by high perceptions of increasing tenant demand which is 6% above the national average at 38% and 13% above the Q3 figure.
In Yorkshire and Humber, the incidence of both arrears and voids are above the national average, by 10% and 8% respectively. Despite this, Yorks & Humber achieve the joint highest rental yields of 6.4% (shared with the East Midlands). Landlords in Yorks & Humber tend to manage relatively large portfolios (10.8 properties), second only to those in the West Midlands, and hold the highest average number of BTL loans at 8.2 vs. a national average of 4.9.
Please note that all information in this article is only valid at the date it was written. Criteria, rates and market movements are moving on a constant and daily basis. What might be true today, does not mean it is tomorrow. This article does not constitute advice and should only be used for informative purposes only.
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