Data from the first three months of this year suggests that investors are increasingly purchasing smaller, cheaper properties.
Specialist lender Mortgages for Business says average loan amounts and security values fell among all property types with figures for ‘vanilla’ properties below any seen in the past year.
The quarter also saw the balance of the buy to let mortgage market shift away from remortgaging - a dominant force until recently - and strongly towards purchases.
The change was particularly strong among complex property types, which Mortgages for Business defines as Houses in Multiple Occupation, multi-unit freehold blocks and semi-commercial property.
“These figures represent a departure from the established norms, which have been mostly defined by the remortgage market. This time, however, we see new and unusual purchase activity from landlords, presumably because changes to income tax relief have prompted them to re-examine their strategies” says David Whittaker, CEO of Mortgages for Business.
Purchases accounted for 41 per cent of mortgage transactions involving vanilla buy to lets - this is around three per cent above the long-term trend “which is likely evidence of an ongoing process of landlords selling their portfolios to newly created limited companies” says Whittaker.
Mortgages for Business says that although incorporation has not been cost effective for all investors, transactions of this type can help to reduce the tax burden on the landlord, often eventually offsetting the initial expense.