TBMC has found that average buy-to-let fixed rates have dropped below variable rates.
Its Landlord Profile Tracking Index for Q1 2013 also reported increasing numbers of landlords who are choosing to fix their costs.
Buy-to-let mortgages in Q1 2013
|Q1 2013||Q4 2012||Change during Q1 2013|
|Average loan size:||£163,265||£156,661||£6604|
|Average rental yield:||6.23%||6.98%||-0.75%|
|Average chosen fixed rate:||4.48%||4.67%||-0.19%|
|Average chosen variable rate:||4.68%||4.42%||+0.26%|
|Average loan to value (LTV):||74.84%||73.11%||+1.73%|
Andy Young, chief executive of TBMC, said: “The buy-to-let mortgage market has got off to a good start in 2013 with a wide range of products available to meet the diverse needs of the UK’s landlords. Factors such as high tenant demand and flat house prices are providing an ideal environment for residential property investors looking to expand their portfolios, and excellent opportunities for brokers with buy-to-let clients.
“Although there is still scope for further improvement in the availability of finance, lenders are showing a keener appetite to lend and some very competitively priced products are currently on offer.
“An interesting feature of the buy-to-let mortgage market recently has been the continuing downward pressure on fixed rates. According to the Index, for mortgage offers processed by TBMC in Q1 2013, the average fixed rate was 4.48% compared with 4.67% in the previous quarter. This reflects the continuing economic issues in Europe, the impact of UK fiscal measures and falling swap rates over the last year.
This trend in pricing has meant that fixed rates and variable rates have been moving closer together over the last 12 months, and for the first time the average fixed rate (for offers received in Q1 2013) dipped below the average variable rate.”
Young said that increased competition has also influenced product design and some lenders are offering low headline rates aimed at specific segments of the market in order to attract new business and reach lending targets.
He added: “Unsurprisingly, as the cost of fixed rate buy-to-let mortgages has fallen more landlords are choosing these products over less predictable variable rates. In Q1 2013, 48% of applications received by TBMC were for fixed rates, up from 41% in the previous quarter.
“During the early months of the year there have continued to be a good selection of products available at 80% LTV from a number of lenders including Kent Reliance, The Mortgage Works, Aldermore, Leeds Building Society, Kensington and Precise. Kent Reliance remains the only lender offering 85% LTV products, although we may see some others extend their thresholds later in the year.
“The 75% LTV bracket has been very competitive during the Q1 2013 with some excellent fixed and variable rates for investors to choose from. Landlords are clearly taking advantage of the improved market conditions to employ higher gearing in their properties, as the average LTV for mortgage offers processed by TBMC in Q1 was up to 74.84% and the average loan size was £155,654.”