Tenant demand hits all-time low as gross rental income falls – TMW
The Gross Rental Income analysis based on a survey by BVA BDRC showed that the average income landlords earn per year dropped by £1,000 to £60,000 coinciding with the decline in demand.
However, although tenant demand and overall gross income dropped, the average income per property rose from £7,992 in Q1 to £8,571 during the period, as landlords reduced their portfolio sizes.
This was also despite fewer landlords reporting they had increased rents over the last year; 21 per cent said this was the case compared to 27 per cent in the first quarter.
The accompanying Tenant Demand Report for Q2, recorded a net score of –11 as the number of landlords citing a slight or significant decline in interest from tenants outstripped those reporting a slight or significant increase.
This is the lowest index score for tenant demand since 2012 and a further drop from the score of –8 reported in Q1.
The proportion of landlords intending to raise their rents over the next six months also dropped as this stood at 13 per cent, down from 15 per cent six months ago.
However, the majority of landlords said they would not make any changes to this as 61 per cent said the rent they charge would remain the same for the next six months.
Increases in rent overall appear to have fallen as only eight per cent of landlords said rent had gone up in the areas they owned properties in. This was compared to the 20 per cent who said the same in Q1.
Landlord and property characteristics
Homes in multiple occupancy (HMOs) provided landlords with the highest yields at 6.9 per cent during the second quarter.
This was followed by bungalows at six per cent then semi-detached houses at 5.9 per cent. Multi-unit blocks (MUBs) provided rental yields of 5.8 per cent while individual flats provided 5.7 per cent.
When it came to employment status, self-employed landlords generated the highest gross rental income at an average of £105,000 a year.
Landlords who were self-employed in other professions saw an average income of £54,000 and the full-time employed received an average rental income of £48,000.
Those who work part-time received the lowest average rental incomes at £37,000 a year.
Borrowing landlords also continued to generate the most profit, the report showed.
Landlords with buy-to-let mortgages earned more than those who owned their portfolio outright, bringing in £75,000 compared to £40,000.
TMW overtakes BM Solutions as largest BTL lender
Overall, buy-to-let (BTL) gross lending totalled £42.2bn in 2019, up 4.2 per cent on 2018.
Unlike the residential mortgage market, buy to let is far less concentrated in a handful of lenders, however despite this, the same big six banks still saw their BTL market share increase by 4.7 per cent and accounted for £20.63bn of new lending – almost half the market.
TMW grew its new BTL lending by £2.1bn to complete £6.6bn, taking a 15.6 per cent share of the market and leapfrogging BM Solutions for top spot. (See table below)
As the buy-to-let market has become more complex following tax and regulation changes TMW began rolling out a limited company proposition in 2018 to support landlords who are increasingly choosing this method of ownership.
In contrast, BM Solutions saw its new lending fall by around £500m as it completed just over £5bn in BTL business, with 12 per cent of the market.
The lender, which is part of Lloyds Banking Group, has chosen to focus on traditional mainstream landlords and has yet to introduce a limited company product, but has expanded its offer to include larger portfolios.
Coventry Building Society, with its Godiva brand, Virgin Money and Metro Bank were among the big name lenders to see their market share fall.
Coventry BS remained the fifth largest buy-to-let lender, completing £2.8bn worth of loans, but this total was down £1bn on 2018.
Virgin Money completed 1.88bn of lending, down £400m from the previous year, while Metro Bank was hit with capital and regulation issues which saw it cut lending by more than half to around £330m.
Meanwhile NatWest grew its BTL business by £700m to complete £2.08bn of lending, becoming the seventh largest lender in the market – leapfrogging Virgin Money and Paragon.
And the completed One Savings Bank merger, which includes Precise Mortgages, Kent Reliance and Interbay Commercial, saw it combine to become the fourth largest lender with £3.89bn of completions.
TMW, Kensington and Teachers BS update BTL products – round-up
The Mortgage Works (TMW) has withdrawn four of its new business deals and increased the rate on another.
The lender, which is part of Nationwide Building Society, has increased the rate on its two-year fixed limited company product up to 75 per cent loan to value (LTV) with a £995 fee to 3.39 per cent from 3.19 per cent.
Two of those deals withdrawn are also from its limited company range, both with no fee, while the others are five-year fixes from its mainstream range up to 50 per cent LTV with £1,995 fee.
Kensington cuts rates
Kensington Mortgages has cut rates on its buy-to-let deals by up to 0.5 per cent.
The lender has four fixed rate products available at up to 75 per cent LTV open to individuals or limited companies.
The two-year fixes are now available at 4.14 per cent with a £1,999 fee, or 4.49 per cent with no fee – assessment rates are at 6.15 per cent and 6.49 per cent respectively.
A pair of five-year fixes are live at 4.24 per cent with a £1,999 fee and 4.59 per cent fee free – assessment rates for these are unchanged.
Teachers BS extends holiday let deals
Teachers Building Society has added two fixed rate products to its existing variable rate holiday let deal.
The mutual said these were aimed at supporting increased demand from new and existing property investors looking to capitalise on growth in the UK holiday-let market.
“As more consumers plan to take a break on home soil as a result of the ongoing pandemic, the need for self-catering holiday accommodation in popular destinations is growing,” it said.
The products, which are available from today are available up to 75 per cent LTV, with the three-year fix at 3.49 per cent and the five-year loan at 3.74 per cent.
Both products have a £99 application fee and a £899 arrangement fee.
Teachers for Intermediaries business development manager Ralph Punter said: “As our own research has shown, consumer demand for UK based holidays has increased as a direct result of the pandemic, a trend we expect to continue into next year too.
“Combined with the recently announced stamp duty holiday, we expect to see increased interest in the holiday let market from investors.
“Our new mortgage products will support those looking to purchase holiday-let homes for short term rental purposes.”
NatWest, Nationwide, TMW and Precise resume Scotland cases as valuations restart
Valuers will be able to resume property inspections in Scotland from 29 June, having already done so this week in Wales.
Nationwide Building Society and its buy-to-let arm The Mortgage Works (TMW) said for those properties on hold, they were hoping to contact the applicant or vendor by 26 June to arrange a booking date.
This will be subject to estate agent access and availability, an initial safety assessment and customer agreement.
“For any physical valuations that were previously booked for week commencing 22 June, these will be rescheduled for week commencing 29 June,” the lender said.
“We’ll continue to accept a transcription of the single survey within the home report for up to six months post inspection, until 31 July 2020 when the normal 90-day rules will apply.”
It also asked brokers not to call as the online case tracking system would be updated and to inform it if the borrower no longer wished to proceed or there had been a material change.
NatWest and Precise
NatWest has confirmed its valuers will also be resuming work in Scotland on 29 June.
This applies to residential and buy-to-let applications, for properties where the occupier allows access and where the valuer confirms the property is safe to enter.
For properties in Scotland, NatWest said its process for transcript valuations remains unaffected and the home report must have been completed within the last 90 days to rely on a transcript.
Where a physical valuation cannot be completed the case will be placed on hold.
And in a communication to brokers, Precise Mortgages confirmed that as per the updated Covid-19 guidelines, it can now progress cases within Wales from today and in Scotland from 29 June, using physical valuations.
Just a third of landlords plan to remortgage this year – TMW
According to a survey of 538 landlords, those with property in Yorkshire and Humber are most likely to remortgage in the next 12 months with 44 per cent saying so.
Above average remortgage intentions were also declared among landlords in the North West at 40 per cent, the East Midlands and 36 per cent, London at 35 per cent and the South West at 31 per cent.
Landlords with properties in Wales are least likely to remortgage, with just 22 per cent saying they planned to do so this year.
Those with larger portfolios are more likely so seek a new mortgage this year; 44 per cent of landlords with more than 20 properties cited so compared to 14 per cent of those with one property.
Landlords with complex properties are also expected to remortgage. Some 46 per cent of those with homes in multiple occupancy plan to do so, followed by 43 per cent with blocks of flats.
The survey also found that landlords with four or more mortgages had a higher chance of refinancing this year with 39 per cent citing their intentions, compared to 24 per cent of those with one to three.
Furthermore, 45 per cent of landlords with properties under a limited company vehicle are seeking to remortgage compared to the 27 per cent of those without a limited company.
Of those who are looking for new deals this year, 53 per cent hope to expand their portfolio while 28 per cent want to dispose of properties.
TMW and HTB increase BTL rates
From today, TMW has increased rates by up to 0.5 per cent, an average increase of 0.3 per cent, for its limited company mortgages.
Options are available with a £1,995 fee, £995 fee and zero fee.
Two-year deals start from 3.09 per cent with the £1,995 fee, while the five-year products start at 3.59 per cent also with a £1,995 fee.
A TMW spokesperson told Specialist Lending Solutions: “This change has been made to reflect a shift in the limited company market. However, our rates remain among the most competitive products in this segment.”
Meanwhile, HTB is increasing its lending rates by 0.25 per cent for all specialist mortgages buy-to-let and semi-commercial products from 15 June.
Alex Upton, commercial director at HTB (pictured), said: “We closely monitor lending and market conditions in order to offer competitive service and products.
“As part of our commitment to our brokers, we will always endeavour to give at least two days’ notice in advance of any rate increases to help in managing their business.”
North East landlords believe in rental sector but not their own businesses
Investors in this area were most likely to be reducing their portfolios, with none purchasing property in the last three months and sales activity higher than the national average.
North East landlords also reported suffering above average void periods and the highest incidence of rental arrears, although this was partly linked to owning the largest average portfolio size.
The research conducted by BDRC for The Mortgage Works landlord panel, quizzed 863 National Residential Landlords Association (NRLA) members with properties in the UK in Q1 2020.
Overall, the picture was not a pretty one as landlords across the country responded to the outbreak of the coronavirus with significant concerns for future prospects.
There were some brighter spots – landlords operating in the South East were generally more upbeat about their own lettings business than the average landlord.
However, this followed significant falls in confidence about the outlook for the UK financial market and for rental yields, which could be linked to landlords in this region reporting the equal lowest demand from tenants.
But despite this 86 per cent said they were still making a profit from their lettings activity, three per cent above average.
Confidence among landlords in the South West has been particularly hard hit, the report noted, with those operating in this region feeling less positive than average on four of the five key indicators.
This is most evident in those feeling good or very good about the prospects for rental yields, which has fallen 27 per cent from Q4, to five per centage points below the UK average.
Landlords in the South West also achieved lower yields and were less likely to have bought property in the last three months.
But they were also less likely to have had arrears or experienced void periods and were more likely than average to report tenant demand was increasing.
One notable quirk was that the two London zones, central and outer, were the only ones to report more than a third of landlords running their operations as their main income.
In central London 40 per cent said they make a profitable full time living, with 37 per cent doing so in outer London – only 42 per cent and 45 per cent respectively said lettings supplemented their day job.
In contrast, the majority of respondents in every other region of England said letting income was in addition to another job.
But despite this positive situation, landlords in the capital reported below average confidence across most of the key indicators.
Nationwide and Santander ask brokers for dead case updates
The lenders both made the requests in updates on their valuations process, noting they are on course to complete all on hold physical valuations by 12 June.
Nationwide and its buy-to-let arm The Mortgage Works asked brokers to let them know if clients were not proceeding with their mortgage applications.
Regarding valuations, the lenders said where they had been unable to make any contact, they had either left a message or sent a text to the applicant or vendor/estate agent.
They said before calling about valuations to contact whoever was given for access to the property and to check the details supplied.
Santander also asked for advisers to inform it “urgently” if cases were no longer proceeding.
It said valuations will be booked in chronological order, with the oldest applications booked in first. Once the valuation has been booked, brokers will be informed.
“Please be aware that receiving a valuation booking date may take longer than usual as our valuation partners need to conduct a detailed government safety assessment as part of the booking process. We thank you for your patience.” it added.
Landlords likely to sell as confidence drops to ‘all time low’ – TMW
According to the research, which was compiled using BVA BDRC’s Landlords Panel in April, just 19 per cent of landlords said they felt “good” or “very good” about the next three months.
This is down from the 37 per cent of landlords who felt positive about the following quarter in Q1 2019, and the lowest the measure has been since BVA BDRC first started collecting data in 2007.
More landlords are looking to sell properties than buy, as the research revealed 21 per cent wanted to sell in the next 12 months while 12 per cent plan to buy property.
This is a one per cent decline on the number of landlords who said they would be selling in the next year, and a two per cent drop on landlords looking to make a property purchase.
TMW’s barometer found that landlord confidence in capital gains and rental yields had also reached an all-time low.
Some 15 per cent of respondents said they were confident about their capital gains for the next three months compared to 25 per cent in Q1 2019. As for rental yields, 24 per cent felt confident about the next quarter down from the 46 per cent who responded positively to the question last year.
According to TMW’s barometer, just 16 per cent of landlords have seen an increase in tenant demand while 24 per cent have seen demand decline. Some 33 per cent said they saw no change.
The report was conducted with the responses of 843 landlords between 20 March and 2 April. It asked landlords if they thought the coronavirus pandemic had affected their lettings business.
It was found that eight in 10 landlords had been negatively impacted by the pandemic, with those in London and the South West being the most severely affected.
Some 43 per cent of landlords predicted they will suffer financial hardship following the pandemic, and those who are looking to exit the buy to let market the soonest feel they will be hit the hardest.
Further, the survey found that self-employed landlords thought they would be worse affected with 54 per cent saying the pandemic would have a significant negative impact on them.
TMW lays out desktop valuation timeframe
In an update on its intermediary website, the lender said for cases received on or before 27 March it expects the assessment will take place by 24 April.
For cases received after this date, their suitability for a desktop valuation will be assessed within four weeks of application.
It may take longer to assess cases in London, Swindon, Bristol, Northampton and Cardiff where the society has seen high demand for mortgage finance, it added.
All mortgage lenders have cancelled physical valuations as surveyors comply with the government’s social distancing guidelines during the coronavirus pandemic.
Valuations on hold
If a property needs a physical valuation the application will be put on hold until lockdown conditions are lifted and it is safe to carry out face-to-face visits, TMW said.
Physical valuations are required for properties such as houses of multiple occupation, certain blocks of flats, for example where an EWS1 fire safety report is needed, and new-build homes in some cases.
Desktop valuations will be considered on new-build homes if the development has been visited in the past 12 weeks and the UK Finance Disclosure Form is available.
If borrowers have requested a homebuyers report or full building survey the case will be placed on hold.
If the client decides to change to a mortgage valuation, brokers can email TMW to request this, with ‘valuation’ as the subject line.
However, the society cannot guarantee the property will be suitable for a desktop valuation.