To say a lot has changed since March is an understatement. Even if we only consider the buy to let market, things have changed almost every day over the last six months, leaving some of us a little lost! To put us all straight, Jeni Browne explains exactly where the buy to let market is now.
It’s been an exciting time in the buy to let mortgage market over the past few months. As I wrote in May, we’d gone from eight buy to let lenders accepting applications at 75% loan to value (LTV) at the beginning of April, and only 14 up and running with desktop valuation processes, to 21 managing both in just two months. Now, the picture is even more optimistic: physical valuations back, and a total of 36 lenders now accept buy to let mortgage applications at 75% LTV and above, with more re-entering the market every week. In the last month or so, we’ve seen at least seven lenders begin to offer 80% LTV buy to let mortgages, with one or two 85% LTV rates appearing too! This return to the top end demonstrates the lenders are confident in the market and resilience of buy to let landlords, despite everything 2020 has thrown at us so far!
In terms of buy to let mortgage interest rates, we’ve seen reductions in the more specialist end of the market, with two-year fixed HMO rates starting from 1.65% at 75% LTV. At the vanilla end of the buy to let market, rates have increased slightly, with the equivalent 75% LTV two-year fixed rates starting from 1.61%.
It has taken a while, but the more specialist buy to let properties, such as HMOs, student lets and Multi-Units are returning to pre-covid criteria, and not just at the 60-70% LTV range. Although there’s been a lot of nervousness around the student let market, we’ve heard from our student landlords that they’ve experienced no issues letting their properties, with some students opting to move in sooner than necessary! This, despite fears that students wouldn’t physically be returning to university at all this September, instead learning remotely from home.
Furthermore, the significant increase in UK holiday home bookings this year has seen several lenders launch holiday let mortgages, including for Airbnb properties. As we’ve already reported this summer, predictions say the demand for UK holiday homes will remain for some years, resulting in a peak in interest from savvy property investors looking to cash in on the high yields this sector offers.
Despite service delays, especially around valuations, lender ability to change processes over this time has been a hugely important factor in keeping the buy to let property market moving. We’ve seen a lot of lenders managing caseloads by withdrawing popular products (such as high LTV rates) after a short amount of time to maintain application processing time expectations. Although sometimes frustrating, this has helped them continue to take on new mortgage applications while also clearing the backlog accrued during lockdown.
What about rents? According to a recent report from Homelet’s, the average UK rent is up 2.1% on July 2020, and 1.5% on the same time last year. 11 of 12 regions showed an increase in average rent rates, with London showing a decrease of 2.1% from last year, although the average rent there (£1,653) is still 100% higher than in the rest of the UK average when excluding London (£825).
In the wider housing market, which has seen an enormous boom since the stamp duty holiday announcement in July, the numbers are looking positive too. According to Nationwide, house prices increased by 2% month on month in August 2020, making the annual UK house price growth 3.7%, up from 1.5%! In addition to the stamp duty holiday, I believe this is mainly due to the pent up demand caused first by Brexit and then lockdown, finally being able to move.
What happens when the mortgage payment holiday and furlough schemes end in October is difficult to predict. At the moment, the UK economy is recovering better than expected, with inflation now at 1% despite the recession. While there was speculation of negative interest rates, the Bank of England Base Rate (BBR) has remained at 0.1% since 19th March, and there seems to be little talk of it moving at all, for the moment.
Although the future is not certain, there are several things you can do to recession-proof your buy to let portfolio, which will help mitigate any periods of financial difficulty, whether for yourself or your tenants.
Needless to say, landlords up and down the UK are taking advantage of the savings available due to the stamp duty holiday, as it’s unlikely we’ll see such an opportunity again for a long time! Overall, the buy to let market appears in considerably better shape than any of us predicted back when lockdown was announced in March!
If you’d like to discuss your property investment plans, do not hesitate to contact our team of expert buy to let consultants on 0345 345 6788, or email firstname.lastname@example.org and someone will be more than happy to help you!