Confidence in the buy-to-let sector - Jun 10, 2021

Positivity in the marketplace

There has been plenty of positive movement in the buy-to-let sector in recent months which has been supported by numerous reports and surveys from different corners of the market.

Moneyfacts reported in late May that average buy-to-let mortgage rates have been on a downward trajectory and reached some of the lowest pricing since the beginning of the year. It calculated the average 2 year fixed rate across all LTVs was 2.95% compared with 3.05% in March. Only January 2021 had a lower average at 2.89% so far this year.

Clearly an average calculation does not show all price movements and some higher LTV products have increased, whereas the lowest 2 year fixed rate available via our brokerage at the time of writing is 1.19%. What it does show though is that there is healthy competition in the market and that lenders are constantly tweaking their product ranges to meet customer demand.

Rise in rents

There has also been news from Hamptons, the estate agents, of a rise in rents which may bode well for landlords. In its latest Lettings Index April 2021, Hamptons showed that average rents rose by 5.9% in Great Britain which was the fastest growth since January 2015. Paragon Bank also reported that during the first quarter of 2021 average rental yields across England and Wales were at 6 per cent, up from5.3 per cent in Q1 2020.

This is encouraging news for potential property investors looking at the prospects for buy-to-let, although the Lettings Index did show considerable regional variations, suggesting that landlords should investigate the rent expectations and tenant demand for the particular area they are looking to purchase property. To illustrate, the highest rental yields recorded in the Paragon Bank survey were in the South West (6.7 per cent) and the North East (6.6 per cent).

Not only are there positive signs in the buy-to-let sector for landlords, but it appears that mortgage brokers are also starting the feel more confident in the market. According to Paragon’s recent quarterly Financial Adviser Confidence Tracker, half of intermediaries polled expect to write more buy-to-let mortgage business during the coming year than in the past year, which is the highest level of confidence found since 2014. 

Lender confidence

It seems that the appetite of lenders is also strong, not only with competitive pricing being evident but also with the development of new product propositions and improving criteria. The specialist buy-to-let sector is certainly in a good state with a wide selection of providers for complex cases such as HMOs, multi-unit blocks, semi-commercial and limited company applications.

More niche lending areas such as for holiday lets are also improving, with Interbay and Paragon recently joining other lenders in this arena. Other good signs for buy-to-let brokers and their landlord clients is the return of the Precise top slicing proposition which allows applicants to use surplus portfolio rental income or earned disposable income to support their affordability assessment.

It is encouraging to see growing optimism across the dynamic buy-to-let sector and it is reasonable expect some growth in the overall level of buy-to-let lending in2021, as key drivers such as tenant demand, strong rents and the availability of finance, continue to support the private rental sector in the UK.


 

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