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 โ 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.
โRecent figures showed the average rental income has hit an all-time high, making the BTL market extremely profitable for landlords,โ said a Moneyfacts spokesperson recently.
As for London, Chris Norris from the Association of Landlords, says that Londonโs BTL market is different to the national, โas house prices have dropped and people havenโt been able to achieve the prices they want, the press has talked of โreluctant landlordsโ but in London weโve not really seen that.
โItโs 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.โ (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 โhousing ladderโ.
And thereโs no shortage of mortgages to choose from. Moneyfacts.co.uk say BTL products have swelled recently โ with the latest offering from the Yorkshire Building Society arriving yesterday.
Best Buy-to-Let mortgages
ย | 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. โThere have been some challenges with other cities where thereโs an oversupply of rental properties, but in the London market is buoyant โ and you donโt have the supply and demand challenges,โ 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 Londonโs buy-to-let market is buoyant. โWeโve seen professional landlords returning in their droves.
โBTL 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 โ more and more people are entering the market.โ
A bridging lender, Dragonfly makes loans ranging between ยฃ50,000 and ยฃ15m, and aims to provide investors with an alternative source of finance than the high street. Posniak says he has seen a โdefinite increaseโ in first-time landlords, โnew investors are spotting the opportunities, thereโs a massive demand for rental properties in Londonโ.ย
And who are these people moving into the market?
โPeople with cashโ.
The Top 5 yields: Q2 2011
1.ย ย ย ย ย ย ย ย Wales โ 7.68%
2.ย ย ย ย ย ย ย ย Yorkshire and the Humber โ 7.57%
3.ย ย ย ย ย ย ย ย East of England โ 7.02%
4.ย ย ย ย ย ย ย ย East Midlands โ 6.55%
5.ย ย ย ย ย ย ย ย West Midlands โ 6.5%
Source: National Landlords Association Quarterly Survey
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Average London yields: Q2 2011
London (central) โ 5.42%
London (outer) โ 5.70%
Source: National Landlords Association Quarterly Survey
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