Buy to Let deals from the leading sites within the industry.
Original article by Sharlene Goff at FT.com – Updated and additions by HouseRepossession.co.uk
Investors who are partly to blame for the state in borrowing, are up in arms that the current buy-to-let mortgage products offer poor interest rates when compared to the base rate and in fact other mortgage products.
We are aware that the drop in property prices has tempted the keen investors back into the market with low prices, good rental prospects showing a keen yield.
Estate agents have reported a substantial increase in inquiries this month. Cluttons, the London-based agent, for example, said it had the busiest January in five years by number of inquiries.
Yet the enquiries are hard to find banks to back them. With only the cash rich, those who can cover a 40% down payment on a property able to lap up the cheap prices. Which in our mind is a good thing, it prevents the market over heating again and if you are in a position to invest in buy-to-let then you should be doing this from a cash rich position, not mortgaged to the hilt.
The average two-year fixed rate on a buy-to-let mortgage has remained at approximately 6.3 % for the past 12 months, according to Moneyfacts.co.uk. During this time the base rate has fallen from 5.5 % to 1.5 %.
The difference between buy-to-let and base rates is because falling property prices have prompted lenders to pull away from buy-to-let, which they view as a greater risk than standard residential business.
The number of buy-to-let mortgage deals on offer has fallen more than 90 per cent in the past 18 months, and the banks that are still lending are demanding larger deposits and higher rental payments.
The lack of finance is proving a big obstacle for buyers waiting to re-enter the property market.
“We have received a lot of calls so far this year from clients who think this is the moment to buy,” said Lindsay Cuthill, a director at Savills “But the hoops through which they have to jump to secure finance are dissuading some from getting involved.”
Most buyers need a 20% deposit to even have a chance of finding a buy-to-let deal and this will be at the high end of the interest rate curve, think closer to 40% LTV to get a good deal. Landlords with a deposit of 20 % have only 15 deals to choose from. The Post Office became the last lender to withdraw its 85% loan-to-value deals this week.
We understand that a year ago there were more than 1,000 buy-to-let deals available for landlords with a deposit of 15 % or less, now there are none. Quite incredible and a true reflection of the banks showing prudence and an aim to build up their loan books with quality mortgages.
The smart investors are finding the cash to buy cheap repossessed properties or simply a good deal when they see one. They will wait for the sharp rise in property prices as LTV’s are relaxed and then leverage against this capital growth in the future. Some deals are too good for the investors to pass on.
James Mannix, head of residential investment at Knight Frank, said banks were only willing to provide funding to professional investors if the properties had yields of 8-10 %, and even then they only wanted to lend 50-70 % of the property value. This is similar to the commercial property market where LTV’s are at around 60% maximum and only on properties with long terms rental income (10 years +) to strong covenants.
Many landlords would now struggle to secure a high enough rental yield to cover their mortgage payments. Lenders have introduced tougher criteria on how much rent is required and, while capital values have dropped, rents also fell towards the end of last year.
What property yields can you find? Any buy-to let bargains out there offering 10% or more return? Let us know below….