The recent absence of first-time buyers is having a positive effect on the buy-to-let market.
Paragon Mortgages’ Buy-To-Let Index noted a slowing residential market has kept yields stable as landlords continue to find bargain properties, while the Association of Residential Letting Agents (ARLA) has released data showing changes in the type of buy-to-let mortgages being chosen.
Yields, income and landlord property values have all stabilised in the last month. Paragon’s figures show average yields for England and Wales at 7.97% in April, up from 7.91% in January.
Average landlord property prices were down to £109,669, from a peak of £111,997 in January. However, prices are still up by almost 20% on a year-on-year basis, with rental incomes remaining stable over the past year, averaging £8,750 per annum.
John Heron, managing director of Paragon Mortgages, said: ‘This month we are seeing a clear stabilisation of yields and rental values. It confirms what we have been saying, that buy to let as a business remains steady and that there is sustained demand for decent private rented accommodation in all parts of the country. Despite what some people are saying, buy to let is not set for a tumble ‘ there is no bubble and there is nothing to burst.’
ARLA’s latest quarterly Survey of Lending Trends shows half of all buy-to -let mortgages are now Base Rate or LIBOR linked tracker mortgages and two thirds are interest only, with no capital repayment. Fixed rate loans accounted for 19.1% of all buy-to-let lending, against 27.8% in the previous quarter, while discount rates fell to 16.6% from 23.5% in the final quarter of last year.
ARLA pointed out that the buy-to-let mortgage market began on standard rates and then moved to fixes and discounts. Malcolm Harrison, spokesman for ARLA, said: ‘Landlords are now taking a look at the general economy and choosing trackers. This suggests they are using a level of sophistication in not going for the most straightforward product. Intermediaries are a valued part of the equation and are advising clients well, aided by the fact that people in this market are taking time to think things through. There is never the same rush as when buying for your own home.’
The average number of loans each month during the quarter to 31 March rose by 4.9%, from 1,142 to 1,198. The amount borrowed rose by only 1.2% from £94.4m a month to £95.5m.
IP quote service now available from Exchange
The Exchange is launching a new Income Protection (IP) quote service on its Exweb portal.
The site allows the submission of new business electronically. Intermediaries can transfer data from the quote service into electronic application forms and submit directly to product providers. The system automatically validates these forms before they can be submitted, reducing the number of errors and, upon submission, enabling providers to start processing applications almost immediately.