The latest Complex Buy-to-let Index by Mortgages for Business has found that landlords are continuing to look for cheaper, higher-performing options when making purchases of any property type.
An analysis of mortgages arranged via Mortgages for Business in Q2 shows that all types of buy-to-let properties purchased during the quarter had much lower values than the overall average.
These lower-value properties provide better return on the landlord’s investment, with both HMO and multi-unit purchases achieving average yields of over 10%. By comparison, these properties achieved yields of just 8.7% and 7.9% respectively when remortgage transactions were included.
Steve Olejnik, COO of Mortgages for Business, said: “Landlords have been selective with their purchases this quarter, choosing properties that maximise their income with minimal investment.
“This strategy is likely to remain common as it allows landlords to maintain profitability while HMRC phases in restrictions on income tax relief for landlords.”
One consequence of this selectivity is that landlords have had to scale back their rate of expansion from last quarter. Q2 saw a drop in the proportion of buy-to-let purchase transactions compared to Q1, returning to the preponderance of remortgages that has become common in recent years.
Only semi-commercial properties saw an increase in purchase activity, with purchases now making up 67% of quarterly mortgage transactions for this property type. However, as a less-common investment, this data set was deemed too small to derive anything of significance.
Loan to values remained stable across the quarter, except for a 4% drop among multi-unit properties.