More than double the number of buy-to-let mortgage products are available now compared to this time a year ago.
According to specialist broker Mortgages For Business, in the first three months of 2010, an average of 142 products were available to buy-to-let investors. This figure more than doubled to an average of 298 products in Q1 2011.
This rise is due in part to the entrance, or re-entrance, of four mortgage lenders to the market but, says the broker, can be attributed mainly to lender response to high demand from the investor market and an easing of lending criteria which has allowed for more diverse product ranges.
Average loan to values for buy-to-let transactions are now at 66%, three percentage points up from the end of 2010 and six percentage points up from the end of 2009.
There has also been an easing of criteria for Houses in Multiple Occupation (HMO) transactions. Average LTVs for these mortgages are now 63% compared to 61% at the end of 2010.
David Whittaker, managing director at Mortgages for Business, said: “As the owner-occupier market continues its slow, ambling advance through no-man’s land, the private rental sector is flourishing.
“Unprecedented demand from renters is encouraging professional landlords and investors to grow their portfolios and this demand has been met to some degree by lenders.”
However, lenders continue to surcharge buy-to-let borrowers with near-punitive rates
For example, yesterday NatWest Intermediary Solutions introduced two new remortgage products – one for home purchase and the other for buy-to-let.
In the first, the 75% LTV, residential remortgage has an initial rate of 3.09% with a fee of £499. In the buy-to-let deal, there is the same 75% LTV, but an initial rate of 5.79% with a fee of £999.
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Comments
It is the same old rules that apply in every market place, supply and demand.
Potential developers and landlords are probably feeling confident that the prices are close to bottom and now is the time to pick up bargains. More importantly lenders must feel the same way. A good combination. However small developers, those that traditionally buy to renovate and sell on to landlords or to let in their own right, have taken a battering in the past two or three years so getting the money together to renovate and then rent out is still going to be difficult. They need bridging finance to take them to the point where they can get a buy to let mortgage. Luckily some brokers have access to bridging finance and buy to let deals. Although the rates are higher than standard mortgages, compared to historic rates they are still good and tie-in periods are quite short so a remortgage in a couple of years is on the cards. The main obstacle has been the requirement to own the property for six months before a buy to let or a remortgage to take out the bridging loan for a renovated property was available. The bridging loan rates were relatively high and took out a large part of the profit making the projects boarder line at best. Now however we have located a number of lenders who have waived the requirement to hold the property for six months and we feel this is what will drive the sector forward again. Don’t start singing “happy days are here again” yet but maybe a couple of verses of “the white cliffs of Dover”.
Nick.