For the third quarter in a row, the number of Buy-to-let (BTL) mortgages have risen by 26% compared to the second quarter.

The total average number of Buy-to-let mortgages on the market is now 508 compared to 403 in the previous quarter. There is now also a new lender on the scene taking the total number of BTL lenders to 23.

The demand from Buy-to-let investers is what is driving this rise as rental demand grows. An average yield from a vanilla BTL rose to 6.3% from 5.8%.

New tenancy numbers  have been at record levels for the last year but the private rental sector (PRS) may be finally running out of space to cater for tenant demand.

The  Association of Residential Letting Agents (ARLA)’s 6,000 members state that the proportion of tenants to properties has reached the highest level since records began.

Three quarters of respondents believe the demand is outstripping supply. The increase is particularly acute in London and the South East and suggests that there is an insufficient supply of property to meet tenant demand.

The survey has  shown that tenants are staying in their properties for longer, wary of trying to find a new property in such a competitive market. It is now at a record 19 months.

A recent change by one of the new Buy to let mortgage lenders has meant there are now 3 lenders that require no proof of income for BTL mortgages for existing landlords.

This can be important for experienced and professional landlords who cannot meet the minimum income levels in 2 to 3 years of £25K to £40K per year. This is usally for very good reasons such as costs have been incurred improving the portfolio which resulted in a small loss, or the landlord has decided to take a repayment of a directors loan.

In these cases the credit and applicant are very credit worthy so it is great to see more choice entering the market.

This week the Kensington announced they were withdrawing 85% loan to value buy to let mortgages. They were the only lender that had offered loan to values at 85% and as such had become over exposed with loans at this level.

It was interesting that no other lender had followed them to 85% since the launch over 6 months ago. It is however rumoured they will look to re-launch the 85% loan to value later this year or early 2012.

Confidence in the buy-to-let market continues to grow, after three quarters of property investors said they plan to expand their portfolios in the next 12 months. Investors highlighted strong rental demand as the main incentive for portfolio expansion, according to the latest research by Assetz, followed by high and rising rental values, and the belief that prices are at or near the bottom. Just one in ten investors believe now is a bad time to invest in UK buy-to-let, with the majority citing concerns about the economy as the main deterrent. Assetz said it has seen sales of UK investment property more than double in the last 12 months and has predicted that it will expand at least 50% again over the coming year.

The Buy to let housing market has been praised for its positive contribution to the UK housing market following its 15th anniversary this month.

Launched in September 1996, Buy to let was an industry wide initiative which included  founder lenders Paragon Mortgages and Mortgage Trust amongst others and the Council of Mortgage Lenders.

Paragon Group Chief Exec, Nigel Terrington said:

‘Buy to let has galvanised the rental market over the last 15 years, providing an attractive asset class for property investors. Buy-to-let finance was the catalyst for the revitalisation of the modern private rented sector.

It was moderised a tired and decaying sector, driving up standards of accommodation and choice for tenants.

The private rental sector provides homes for nearly one in six households and its importance will increase in the future as population growth and housing completions diverge.’

Buy to let statistics:

Since 1999, 2.1 million BTL loans have been advanced. There are currently 1.3 million loans outstanding.

In England, the number of properties in the private rental sector has risen from 2.1 million in 1996 top 3.9 million in 2010.

The number of homes in the private rental sector classed as ‘decent’  rose by 59% in the ten years following 1996.

The proportion of private rental sector properties in the lowest two energy efficiency bands fell from 46.7% in 1996 to 19% in 2009.

Graduates have added to the demand for rented properties this year, making  the average rental rate rise to £713 a month.

Tenants paid 1.2% more on average to rent a property in the UK in August than they did in July, studies have shown. The quickest rise was in South East England and Wales. In the last two years, the average rent has risen by more than £50 a month.

Further rises in rent are also expected in the next few months.

But with more and more people struggling to get on the mortgage ladder, renting is theonly option.  Tenants arrears have also
increased however for the first time since April, with 10.7% of all UK rent unpaid or late by the end of August.

This is up from 9% in July.

New data released by the Council of Mortgage Lenders states an increase in buy-to-let loans of 21% in the second quarter of 2011.

Between April and June,  32,000 buy to let loans were arranged, worth £3.5 billion -the highest number and worth since the end of 2008.

The main increase in buy-to-let lending (65%) was from remortgaging. 15,230 loans at £1.6 billion.  27% higher than in the first quarter and accounted for 53% of total gross buy-to-let lending. A rise of 51% in the first quarter.

And buy-to-let mortgages continued to increase. By the end of the second quarter, 1.34 million buy-to-let mortgages worth £154.5 billion were outstanding - up from 1.26 million and worth £148.8 billion at the end of the same period in 2010.

Whilst this is a substantial increase, the market is down to one third of what was seen at the peak of lending in 2007.

Arrears rates for buy-to-let mortgages are lower than in owner-occupied properties for the first time since 2008. In the second quarter, all buy-to-let loans which were over three months in arrears were at 28,100 or 2.09% of the total. 0.05 percentage points lower than in the owner-occupied sector. There was an increase of 9%  in reposessions in the buy-to-let sector, from 1,700 in the first quarter to 1,900 in the second.

“If you consider the buy-to-let recovery alongside the increase in first time buyer numbers we published, it appears that first time buyers are not being displaced by buy-to-let landlords but are holding their own in a restricted market. So this is encouraging news for those who want to rent. As long as it’s realised that much of the content increase is for remortgage rather than house purchase.”

Paul Smee, Director General, CML

Limited company  Buy to let (BTL) mortgages is an area we specialise in. Over the years we have arrangerd mortgages for all types of properties and customer types.

As of today we have 9 lenders that will provide these types of loans and this provides us with a wide range of solutions. One of the reasons we need to understand this area in detail is the different requirements that lenders have for directors and shareholders of the limited company.

One of the main lenders requires that all directors and shareholders are part of the application process and are UK based and another requires that the applicants control 80% of the shares.

With our wide range of solutions we have been able to arrange solutions for

1) Ltd company buy to let where one of the directors was not UK based

2) A ltd company where the two directors only controlled 50% of the shares and there was 8 shareholders.

For more information visit

http://www.advocatefinance.co.uk/buy-to-let/buy-to-let-ltd-company/

This month has seen the introduction from one lender of a 85% loan to value buy to let mortgage. In the last 18 months we have seen loan to values move from 75% to 85%. I think this is good news for investors but this 85% product is not for everyone, the good and bad points of the mortgage are as follows:

Good points

• Will lend up to 85% for both purchases and remortgages
• First time landlords accepted
• Available to investors will large portfolios as long as they don’t have more than 3 properties with the lender
• Min loan £25K Maximum loan £350,000

Bad points

• The interest rate is a fixed rate of 5.99% for 2 years
•  Reverts to libor+5.00% (which give a current rate of 5.80%)
• Need a min personal income of £30,000 per annum

Conclusion

• This mortgage would be ideal for those properties which can command yields of 7%-9%. The minimum deposit of only 15% would allows investors to minimise your initial cash outlay and still enjoy income on the property after paying the mortgage interest.

For further information or a quote, please give us a call