Number of BTL products falls for first time since 2013

by: Carmen Reichman
  • 12/10/2016
  • 0
Number of BTL products falls for first time since 2013
The number of buy-to-let products available to investors has fallen for the first time in three years in the third quarter of this year, research by Mortgages for Business has found.

According to the broker there were 1,120 products in the market in the three months to September, distributed by 33 main lenders.

Last quarter the same number of lenders had offered an average of 1,180 buy-to-let products to the market: 5% more.

Product numbers had increased steadily since the third quarter of 2013, with remortgages continually outstripping purchases in most categories – a trend the broker said it expects to continue in the current low interest environment.

Managing director David Whittaker (pictured) said: “Although product numbers have fallen slightly there is still in excess of 1,000 products out there – plenty of choice for landlords. I imagine product numbers will remain fairly stable for the next 12 months, at least until we see some new lenders enter the market.”

He added: “Remortgages continuing to outstrip purchases is no surprise.”

The average loan-to-value (LTV) on buy-to-let products of any kind remained stable at 67% over the last five years, despite changes to average property values and loan amounts, Mortgages for Business said.

For instance, vanilla buy to let saw average property and loan values rise slightly over the past year, from loans of about £221,000 in the last quarter of 2015 to £253,000 in Q3 this year, with yields averaging at about 5.8% in the period.

More complex assets, such as houses in multiple occupation (HMO) and multi-units, on the other hand, saw average loan sizes decrease over the course of the last five years – from £318,000 to £261,000 for HMOs and £528,000 to £254,000 for multi-units. In the most recent quarter, both saw an upswing, however and yields remained around the 9%-10% mark.

Whittaker said: “I can see two main reasons for this reduction in loan amount one of which being that smaller, less expensive HMOs and multi-units are being financed in areas of higher property prices. The second reason is that in areas of the country where property prices remain low, there has been an increase in purchases and subsequently refinancing of HMOs and multi-units.

“I’ve no doubt this increase in HMO and multi-unit purchases comes down to the growing demand for smaller, less expensive rental accommodation accompanied by the higher yields they tend to produce.”

Buy-to-let activity, in general, has seen a dip this year following government reforms of the way investors are taxed on second properties.

The latest figures from the Council of Mortgage Lenders indicated a 38.7% fall in the number of loans taken out to buy buy-to-let property in August compared with the same month last year.

Despite that, Rightmove said landlord enquiries for buy-to-let properties had increased 30% since May, following an initial dip in activity earlier in the year. New rental listings were also up 6% on the same quarter in 2015, the firm said.

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