A raft of high street and major lenders have recently been announcing plans to help the buy-to-let sector with the ability to borrow and expand portfolios.
Following on from an interesting 2016 for landlords, the lenders which provide the majority of the financial support for landlords have bolstered their range of lending products in order to encourage more activity in a very profitable market.
Demand is approaching all-time highs for rental properties and, despite common perception, the attitudes of many young people and families are voluntarily shifting towards the benefits of renting in the long term. The flexibility to move whenever they wish, no need to worry about maintenance costs, and the freedom that renting brings has actually brought a lot of people round to the idea of renting as a more permanent living situation.
In terms of house price growth, the latest report from Nationwide has stated that there was a 0.2% month-on-month rise in average house prices during January, with annual house price growth stable at 4.3%. With house prices growing in a stable fashion and demand strong, the environment for buy-to-let is fertile. In order to nurture it further there needs to be finance available for those willing to invest.
In terms of affordability, there has been positive news this week from the Halifax which reports an 18% improvement in the affordability of mortgages since pre-financial crisis peak in 2007. Typical mortgage payments at the average loan-to-value (LTV) ratio stood at 30% in Q4 2016 compared to the peak of 48% in Q3 2007. The report indicates that historically low mortgage rates have been the main driver behind the significant improvement in affordability since 2007. This, in turn, has allowed more first time landlords to enter the market.
Further to this encouraging research, Bank of Scotland has released figures for the most affordable placed in the UK for mortgages, with the North and North West ranking highly in the affordability stakes. The North and Humberside both came in at 23% of disposable income, with the North West close behind with an average 24% affordability rating in comparison to earnings. Payments are highest in relation to earnings in Greater London (49%), the South East (41%) and the South West (34%). London is the only region where the current rate is above its long-term average.
In terms of lenders expanding their buy-to-let lending ranges, the Post Office has recently announced that it will launch a new range of competitive buy-to-let mortgages. According to Post Office Money the new range is “designed for those buying their first buy-to-let property, or someone who aspires to own one or two investment properties, and combine manageable upfront costs with great ongoing value.”
Included in the range will be:
- 60% LTV three-year fixed rate at 2.28% (£995 fee);
- 70% LTV two-year fixed rate at 1.93% (£995 fee;
- 70% LTV five-year fixed rate at 2.78% (£995 fee);
- 75% LTV two-year fixed rate at 1.98% (£995 fee).
Meanwhile, Pepper Homeloans has recently announced that it has increased its residential mortgage range, slashing most of its of two-year fixes by up to 0.25% and launching new 30-month, three-year and five-year fixed products.
Regardless of previously sour news from the Treasury and HMRC, landlords can feel positive that there is a range of new support and a good environment for landlords to flourish in 2017.
With letting agents improving vastly over recent years landlords are also able to enjoy simple and easy management of the properties and tenants meaning that when the difficult and stressful process of arranging finance and renovation they can hand over the remaining process to professional and affordable agents. 2017, it seems, will be a big year for landlords.