Buy to let landlords increase their equity as house prices grow

UK landlords are putting 15 per cent more equity behind them to purchase new properties as house prices continue to increase

Buy to let landlords in the UK are now putting nearly £100,000 into deposits on properties, according to the Mortgage Search Tracker from the Mortgage Advice Bureau.

It means the level of equity being placed has increased by £13,289 in the last year to an average of £99,914 per property.

Higher cash deposits mean landlords are able to get better interest rates, while the average loan to value deal being sought fell from 62.2 per cent to 56.5 per cent.

Negotiating a better deal

The tracker analysed 250,000 monthly product searches that took place in the final three months of 2014 and also revealed that the average property value for buy to let borrowers remained constant throughout that period at just under £230,000.

This is marginally less than the £231,000 sought by the average homebuyer and puts landlords in a potentially lucrative position.

“Landlords are in an especially strong position to use their recent equity gains to negotiate a better mortgage deal,” explained Brian Murphy, Head of Lending at Mortgage Advice Bureau.

“House prices have settled into a steadier pattern in recent months, but the current low rate environment offers many buy to let borrowers the chance to reassess their finances.”

Buy to let customers are also looking to borrow funds across a shorter time period as the number of people wanting a mortgage term of 25 years or more has fallen.

A year ago, 62 per cent of buy to let borrowers were seeking such terms but this decreased to 52 per cent in the final quarter of 2014.

Instead, borrowers are seeking terms of 15-24 years with 41 per cent of people wanting this length of mortgage in the fourth quarter compared to 29 per cent a year earlier.

A recent report from Knight Frank added that householders are predicting slower price appreciation throughout 2015 while figures from Rightmove suggest the average property in England and Wales is now priced a little over £279,000 – above the average amount paid by buy to let landlords seeking new properties.


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