As the buy-to-let mortgage market has expanded more lenders are now offering higher loan-to-value (LTV) products, according to TBMC, which has just published its latest Landlord Profile Tracking Index.
The results are based on a sample size of 562 applicants for buy-to-let mortgages via TBMC during July, August and September 2012.
The distributor said there is a wide range of rates available up to 80% LTV and Kent Reliance still offers 85% LTV mortgages in its core range and for HMOs, limited companies and student lets. The
provision of higher LTV finance has resulted in a noticeable rise in the average LTV for buy-to-let loan offers received by TBMC during quarter three (72.63% compared with 67.30% in the previous quarter).
Average rents have stayed strong so far during 2012 as tenant demand remains high, and the average monthly income was again over £1000 a month during quarter three.
According to the Index, student tenants provide the highest rental yields for tenant type (often from HMO properties) with an average yield of 8.23%.
Terraced houses provide the highest rental yields for property type at 7.28%. Students in terraced houses on average provide a rental yield of 8.34%. Given that the average rental yield overall was 6.60%, landlords may look to the student segment of the rental market to maximise their returns, TBMC said.
In terms of the type of product that landlords are choosing, during Q3 2012, 60% of buy-to-let applications received by TBMC were for variable rates compared with 40% for fixed rates. The average fixed rate chosen during this period fell from 5.06% to 4.88% and the average variable rate rose from 4.10% to 4.40%.
“With variable rates still cheaper than fixed rate products, more landlords are opting for lower initial rates, which may reflect a growing consensus that interest rates will continue to remain low for some time to come,” said Andy Young (pictured), chief executive of TBMC.
“The increase in the average variable rate can be attributed to the availability of higher LTV products which are also priced higher.
“In terms of the split between purchases and remortgages, it was absolutely even during Q3 with 50% of applications received for each type. This demonstrates the keen appetite amongst landlords looking to take advantage of the excellent remortgage deals available to release equity from their existing properties, and those looking to expand their portfolios with the purchase of additional properties.”