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A nation of landlords?

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5th Sep 11 9:00 am

Britain may be nation of shopkeepers, but London prefers the buy-to-let market

Only last month another buy-to-let product came on to the mortgage market, bringing the total up to 505 – compared to189 in 2009. According to the Council of Mortgage Lenders (CML), the past couple of years has seen a pronounced increase in the number of BTL mortgages being taken out; in Q1 this year 27,600 BTL mortgages were drawn compared with 21,600 in 2009.

But the real growth has come more recently. The finance data site, Moneyfacts.co.uk, says there has been a threefold increase in the demand for BTL mortgages since March 2010.

“Recent figures showed the average rental income has hit an all-time high, making the BTL market extremely profitable for landlords,” said a Moneyfacts spokesperson recently.

As for London, Chris Norris from the Association of Landlords, says that London’s BTL market is different to the national, “as house prices have dropped and people haven’t been able to achieve the prices they want, the press has talked of ‘reluctant landlords’ but in London we’ve not really seen that.

“It’s far more attractive still for traditional investors to buy up property in London. Average rental yields have hit around 6.5 per cent, which is above the national average.” (See table for the top 5 average rental yields)

Indeed, the market has never been stronger. While problems facing first-time buyers dominate column inches, savvy investors are buying up London property for buy-to-let faster than you can say “housing ladder”.

And there’s no shortage of mortgages to choose from. Moneyfacts.co.uk say BTL products have swelled recently – with the latest offering from the Yorkshire Building Society arriving yesterday.

Best Buy-to-Let mortgages

  Rate APR Cost Mortgage Type Period Max LTV Redemption
Skipton BS 3.24% Reverting to 4.95% 5.00% Variable 2 years 60% 1st 2 yrs
Hinckley & Rugby BS 3.54% Reverting to 5.64% 5.30% Discounted Variable 2 years 65% 1st 2 yrs
Market Harborough BS 3.85% for term 4.00% Discounted Variable Term 70%
Bank of China (UK) 3.88% for term 4.10% Variable Term 75% 1st yr
Principality BS 3.99% Reverting to 4.99% 5.00% Fixed 30/09/2013 60% To 30/09/13
NatWest Mortgage Services 4.39% Reverting to 4.50% 4.80% Fixed 31/08/2013 75% To 31/08/13
Coventry BS 4.49% Reverting to 4.74% 5.00% Fixed 30/09/2014 65%
Nottingham BS 4.99% Reverting to 6.54% 6.40% Fixed 01/09/2014 75% To 01/09/14
Furness BS 5.30% Reverting to 5.44% 5.60% Fixed 31/08/2016 70% To 31/08/16
Coventry BS 5.49% Reverting to 4.74% 5.40% Fixed 30/09/2016 75%

Source: Moneyfacts.co.uk, 11 August

The Yorkshire launched its new product into the South and South East only. “There have been some challenges with other cities where there’s an oversupply of rental properties, but in the London market is buoyant – and you don’t have the supply and demand challenges,” explains Jeremy Law, head of buy-to-let at the Yorkshire.

And all this increased competition has driven down lending rates; with the average rate falling by one per cent.

Meanwhile London rents have soared. Great news for landlords, but not so great for tenants.

Mark Posniak, of specialist lender Dragonfly Property Finance, agrees that London’s buy-to-let market is buoyant. “We’ve seen professional landlords returning in their droves.

“BTL is very hot, without BTL the mortgage market as a whole would be in a worse position than it is now. Our own BTL product has gone from strength to strength – more and more people are entering the market.”

A bridging lender, Dragonfly makes loans ranging between £50,000 and £15m, and aims to provide investors with an alternative source of finance than the high street. Posniak says he has seen a “definite increase” in first-time landlords, “new investors are spotting the opportunities, there’s a massive demand for rental properties in London”. 

And who are these people moving into the market?

“People with cash”.

The Top 5 yields: Q2 2011

1.         Wales – 7.68%

2.         Yorkshire and the Humber – 7.57%

3.         East of England – 7.02%

4.         East Midlands – 6.55%

5.         West Midlands – 6.5%

Source: National Landlords Association Quarterly Survey


Average London yields: Q2 2011

London (central) – 5.42%

London (outer) – 5.70%

Source: National Landlords Association Quarterly Survey



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