I’m sure that those firms operating in the intermediary market with a strong landlord client base will not be too displeased to see the back of 2023 as a whole. However, in recent weeks, a growing sense of optimism is emerging from the landlord community and this should be filtering through into the adviser community.
The strength of tenant demand is playing a major role within this. As perhaps is the belief that mortgage rates may now have topped out and that the market is finally shifting southwards. Increasingly competitive mortgage rates are also resulting in a slight lessening in affordability boundaries as lenders look to bolster business volumes in a responsible manner.
It’s no secret that we’ve seen a sustained shift to a market where the profile and presence of portfolio landlords are dominating new business enquires. And an even greater emphasis is being placed on specialist lenders to deliver the criteria, products and policy to meet some increasingly complex needs.
There are clearly a large number of factors for each individual landlord to take into account when looking at the performance of their own portfolio, and their optimism – or otherwise – for the future. Divestment within these portfolios has certainly been evident in recent times and one of the most discussed areas within the current BTL market is the ongoing value attached to HMOs, the yields being generated, and the costs attached to these.
The potency of these returns was evident in the Q3 2023 Landlord Panel research from BVA BDRC – in conjunction with Foundation Home Loans – which saw HMO lettings generate significantly higher average rental yields when compared to other property types (6.3%). This denoted a rise of 0.3% compared to Q2 figures when HMOs shared the top spot with MUBs at 6%.
In the latest iteration of the report, MUBs maintained their 6.0% average. The next largest yield generator in the report was reported to be bungalows at 5.7% followed by semi-detached houses at 5.5%, terraced houses at 5.4%, detached houses at 5.3% and finally individual flats which came in with a 5.2% average rental yield.
On the back of some rising demand for larger property types which may have formerly been deemed lesser alternatives, here at Foundation Home Loans, we’ve been working with a select number of intermediary partners over the past few months in a bid to offer something that little bit extra for portfolio landlords.
Following the success of this pilot, we have now extended our new F2 Extra range of buy-to-let products into the wider intermediary marketplace. This range covers Extra Large HMO properties (nine bedrooms or more), holiday lets, Extra Large portfolios and Extra Large loans; essentially products which have been specifically designed for property or loan types beyond that typically catered for in the specialist buy-to-let market.
We are able to service these needs through having a dedicated team of experienced underwriters in place who are familiar with complex property types and niche areas and have to remit to assess the whole case on its merits and consider the landlord’s entire property portfolio.
We may be operating in a time where business volumes are down across the board but this should be used as the catalyst for lenders to find new ways in which to deliver solutions to match ever-shifting landlord aspirations. After all, opportunities are emerging for landlords who are well positioned to take advantage of them and by offering that bit Extra, specialist lenders can open the door to these opportunities for landlords who might otherwise have had to use costlier lending options.
Grant Hendry is director of sales at Foundation Home Loans