Life after stamp duty - what now for buy-to-let? - Aug 31, 2021

From July 1st the zero rate stamp duty threshold was reduced from £500,000 to £250,000 and on 1st October it will revert to £125,000, so there is still time for those purchasing properties to make some savings. Although buy-to-let property investors pay a 3 per cent surcharge, the stamp duty holiday has created a boost in rental property purchases over the last 18 months.

Despite the stamp duty incentive coming to an end, there are still strong drivers for landlords to maintain their portfolios and look for opportunities to make additional property purchases. Average rental yields across England and Wales remain strong and recent data published by Fleet Mortgages supports this.

According to the data, landlords benefited from an average rental yield of 5.6 per cent in the second quarter of 2021 with some interesting regional variations. Year on year, Yorkshire and Humberside had the biggest increase rental yield rising from 6.1 per cent to 7.2 per cent.

Although London has suffered during the pandemic with falling rents, it is likely to recover well once the capital city opens up more fully following the enduring lockdown measures.

For landlords seeking to remortgage, release equity or expand their portfolios, buy-to-let lenders in the marketplace continue to demonstrate their appetite to lend. Increased competition means that buy-to-let mortgages are keenly priced and there are now more options available at higher loan-to-values (LTV), particularly in the 80 per cent LTV bracket.

This bodes well for buy-to-let brokers who are looking to write more business with their landlord clients as there is a good choice of products for most scenarios. The complex buy-to-let mortgage market is also flourishing and specialist lenders are perhaps being used more than ever before, especially for cases that don’t fit with mainstream providers.

It also appears that complex buy-to-let lenders are in favour with the intermediary community according to recent research by Smart Money People. The research involved 597 brokers who were asked to rate 44 different mortgage lenders from across the industry. 

The complex buy-to-let lenders included in the research were rated highest by brokers for flexibility with a score of 96 percent, followed by mainstream buy-to-let lenders with a score of 87 per cent. This underlines that within the buy-to-let mortgage sector, brokers value being able to deal with lenders that have a flexible approach to underwriting especially for more complicated cases.

However, the complex buy-to-let lenders only scored 67 per for their ease of use compare with 80 per cent for mainstream lenders. This is perhaps unsurprising as complex cases normally involve more thorough underwriting practices and have greater supporting evidence requirements.

Buy-to-let intermediaries can take confidence from a recent report from Hodge which showed that nearly three quarters (73 per cent) of portfolio landlords use a mortgage broker to arrange finance for their buy-to-let properties. Furthermore, 71 per cent of large portfolio landlords (£2m- £50m portfolio value) said that using a mortgage broker had saved them money.

This clearly highlights the value placed on buy-to-let mortgage brokers and an appreciation for the service they provide to their landlord clients.


 

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