Lenders step up buy-to-let offers as demand rises
02-16-2014
By Emma Dunkley and Thomas Hale
Estate agent signs advertising residential property ''To Let'', ''Let By' and "Sold", stand outside a block of residential apartments in the Clapham district of London, U.K., on Friday, Feb. 22, 2013. U.K. home sellers raised their asking prices to the most for a February in five years as inquiries from potential buyers increased,
©Bloomberg
Lenders are offering more buy-to-let mortgages – with better rates on smaller deposits – in response to soaring demand from landlords over the past year.
Buy-to-let lending for house purchases increased by 18.6 per cent in 2013 compared to the year before, according to figures from the Council of Mortgage Lenders.
Boost for landlords as arrears fall
The last quarter of 2013 also saw buy-to-let lending finish strongly – despite a seasonal dip in December, it was up 20 per cent against the same period in 2012.
Demand for loans is picking up as landlords in the UK seek to expand their property portfolios, with a third aiming to do so in the next 12 months, according to the latest BM Solutions/BDRC Continental Landlord Panel.
About 80 per cent of landlords are able to make a profitable full-time living from their lettings activity, the panel showed, while the average amount owed by tenants in arrears has fallen to a three-year low of £1,499 – despite rising rents.
In response, more lenders are re-entering the buy-to-let market with competitive deals. The Post Office has launched a range of fixed-rate products at 60 per cent and 75 per cent loan-to-value, with two-, three- and five-year terms.
John Willcock, head of mortgages at the Post Office, said: “There has been a significant increase in the demand for buy-to-let mortgages in the past 12 months as more borrowers consider the rental market.”
Specialist buy-to-let lender Mortgage Trust has also launched a range of mortgages for landlords with only 20 per cent deposits. It includes two-year fixed deals, one with a rate of 4.10 per cent and a 1.75 per cent fee, and the other with a 4.95 per cent rate and no fee.
The lender is also offering a two-year Libor tracker starting at 3.70 per cent (Libor plus 3.10 per cent) with a 2 per cent fee and 4.70 per cent with no fee.
Aaron Strutt, broker at Trinity Financial, said many lenders previously demanded deposits of 40 per cent to access the best rates. He added that the two deals with fees are best buys in the market for borrowers with 20 per cent deposits.
Buy-to-let mortgages
Lender
Mortgage Trust Two-year Libor tracker 3.7 2%
The Mortgage Works Two-year f
ix 4.14 2.50%
Clydesdale Bank Two-year fix 4.19 £1,999
Aldermore Bank Two-year fix 4.48 2%
Kent Reliance Two-year discounted 4.59 2.50%
Precise Mortgages Two-year Libor tracker 4.71 2%
Investec Two-year fix 5.09 1.50%
Leeds BS Two-year fix 5.09 £999
Source: Trinity Financial
With more people in Britain forced to rent, demand among landlords for buy-to-let mortgages is increasing.
George Spencer, chief executive of lettings agency Rentify, said it was “encouraging” that the range of products for larger loan-to-value advances was expanding.
Regions dominate UK buy-to-let hotspots in 2013
Ray Boulger, a mortgage broker at John Charcol, agreed: “It’s good to have another lender coming into that space. The fact Mortgage Trust is part of a major player is encouraging. It could encourage other lenders to come into the 80 per cent space in due course, which will help to drive costs down.”
Mr Boulger added that buy-to-let mortgages are very profitable for lenders and he expects more lenders to come into this space over the course of the next year.
Although the tracker deals look compelling, those opting not to fix run the risk that interest rates will go up in the next two years. “There is always a risk associated with tracker rate mortgages and they can increase without warning. It may not always be the best policy to take a marginally cheaper tracker, particularly if you can fix in by paying slightly more,” said Mr Strutt.
Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.