Landlords: Now's the time to expand!
With demand booming for rental property, now is the time to capitalise on current market conditions.
The sun is shining on the buy-to-let market in 2011 after last year marked a turning point in the sector’s fortunes.
A host of new lenders launched into the market in 2010, and more are joining them this year, including Yorkshire Building Society, which recently announced it will launch a buy-to-let product range this year.
In addition, the fundamentals are ripe for investor landlords to really make the most of current conditions to expand their portfolios and capitalise on the unassailable fact that more and more Britons need to rent.
The latest figures released from Paragon Mortgages last week show that the inexorable rise in tenant demand continues.
We need to rent
In fact, tenant demand has now hit a two-year high, according to the lender’s Private Rented Sector Trends Report, with 40% of landlords saying demand has strengthened. This is the highest number to say so since 2008 and the sixth consecutive quarter that landlords have noted the trend.
Indeed, Paragon reckons that in some popular markets, such as London for example, demand is so great that sealed bids are back in vogue again, with landlords aware that they have a queue of tenants vying for their available properties.
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See the guideThe growing demand over the last 18 months has coincided with a lack of mortgage availability for homebuyers in the residential mortgage sector. In other words, more wannabe first-time buyers are turning to renting because they simply can’t get a mortgage. And there are unlikely to be any dramatic changes for buyers in the coming year or so, so tenant demand is expected to stay sky-high.
It is little wonder then that the report also showed that the average void period for landlords also fell for the second quarter in a row to an average of just 2.9 weeks a year -- another indicator of the current strength of demand for rental property.
More demand = time to expand
New Government data backs up the Paragon report that demand is booming for rented property. The English Housing Report from the Department for Communities and Local Government confirms that private renting is a growing and vital part of the UK housing market.
It shows that the number of households renting privately has risen by one million since 2005-06 to 3.4 million in 2009-10. The private rented sector now accounts for one in six (15.6%) of all households in England, up from 11.7% in 2005-06.
At the same time there here has been a decrease in the number of owner-occupied households, from a peak of 14.8 million in 2005-06 to 14.5 million in 2009-10. The proportion of households in owner-occupation has been in decline since 2003, falling from 70.9% to 67.4% during the period. And that figure looks likely to fall further given the current constraints on those looking to buy their first home.
The proportion of social renting households is also in decline, falling from 19.5% in 2001 to 17.0% in 2009-10, meaning there is a greater need than ever for the private rented sector. And with the coalition Government announcing swingeing cuts to its social housing budget last year, the pressure on private landlords to mop up the overspill is huge.
John Fitzsimons highlights three things to consider if you’re planning a buy-to-let investment
Economic research consultancy Capital Economics reckons that one in five households will be in the private rented sector by 2015 -- an environment ripe for landlords to expand their portfolio and capitalise on the current market conditions.
Even better, the previously missing ingredient, access to buy-to-let mortgage finance, is improving with every month.
Better buy-to-let deals
The buy-to-let mortgage market has improved significantly in the past year, with product numbers doubling and ten new lenders entering the sector last year alone.
Plus this year looks equally exciting, with new launches and more flexible criteria making it easier for landlords to get a buy-to-let loan or remortgage to release equity from their current properties to fund expansion.
Indeed, Paragon’s survey noted an increase in mortgage finance availability in the last quarter of last year. A significant 19% of landlords said that mortgage finance was either widely or reasonably available, up from 17% during the third quarter.
And with house prices still stuttering and bargains to be bagged, all the key ingredients are now in place for landlords looking to expand their portfolio.
Below are some of the best buy-to-let deals on the market right now:
20 fab fixed rates
|
LENDER |
TYPE OF DEAL |
RATE |
FEE |
MAX LTV |
|
2-year fix |
3.99% |
3.5% |
65% |
|
|
2-year fix |
4.09% |
2.5% |
60% |
|
|
2-year fix |
4.19% |
3.5% |
75% |
|
|
2-year fix |
4.49% |
£1,249 |
60% |
|
|
2-year fix |
4.65% |
1.5% |
60% |
|
|
2-year fix |
4.69% |
2.5% |
70% |
|
|
2-year fix |
4.69% |
2.5% |
75% |
|
|
2-year fix |
4.79% |
£995 |
60% |
|
|
2-year fix |
4.80% |
2.5% |
75% |
|
|
2-year fix |
4.99% |
3.5% |
80% |
|
|
2-year fix |
4.99% |
£1,495 |
75% |
|
|
3-year fix |
4.99% |
3.50% |
75% |
|
|
2-year fix |
5.19% |
£995 |
75% |
|
|
3-year fix |
5.19% |
£1,495 |
75% |
|
|
3-year fix |
5.25% |
2.5% |
75% |
|
|
2-year fix |
5.39% |
£999 |
75% |
|
|
3-year fix |
5.49% |
3% |
80% |
|
|
5-year fix |
5.69% |
£1,549 |
60% |
|
|
5-year fix |
5.79% |
3.5% |
75% |
|
|
2-year fix |
5.99% |
2.5% |
85% |
15 great variable deals
|
LENDER |
TYPE OF DEAL |
RATE |
FEE |
MAX LTV |
|
2-year tracker |
3.29% (Base + 2.79) |
2.5% |
60% |
|
|
2-year LIBOR*-linked tracker |
3.30% (LIBOR + 2.5%) |
2% |
65% |
|
|
2-year tracker |
3.39% (Base + 2.89) |
2.5% |
60% |
|
|
2-year tracker |
3.79% (Base + 3.29) |
2.5% |
65% |
|
|
Term tracker |
3.88 (Base + 3.38) |
£1,895 up to £500,000 |
75% up to £150,000 70% over £150,000 to £500,000 |
|
|
2-year tracker |
3.89% (Base + 3.39) |
2.5% |
70% |
|
|
2-year tracker |
3.99% (Base + 3.69) |
2.5% |
75% |
|
|
2-year tracker |
4.10% (Base + 3.60) |
1.5% |
60% |
|
|
2-year discount |
4.29% |
£999 |
70% |
|
|
2-year tracker |
4.49% (Base + 3.99) |
£1,999 |
75% |
|
|
2-year tracker |
4.50% (Base + 4.00) |
2% |
75% |
|
|
2-year tracker |
4.59% (Base + 4.09) |
£995 |
75% |
|
|
Term tracker |
4.99% (Base + 4.49) |
£1,495 |
65% |
|
|
Offset term variable |
4.99% |
£999 |
80% |
|
|
Term LIBOR*-linked tracker |
4.99% (LIBOR + 4.24%) |
1.5% |
75% |
*London Interbank Offered Rate
More: Find a competitive mortgage | Get ready for mortgage rate rises | The time is ripe for buy-to-let
Use lovemoney.com's innovative new mortgage tool now to find the best mortgage for you online.
At lovemoney.com, you can research all the best deals yourself using our online mortgage service, or speak directly to a whole-of-market, fee-free lovemoney.com broker. Call 0800 804 8045 or email mortgages@lovemoney.com for more help.
This article aims to give information, not advice. Always do your own research and/or seek out advice from an FSA-regulated broker (such as one of our brokers here at lovemoney.com), before acting on anything contained in this article.
Finally, we tend to only give the initial rate of a deal in our articles, but any deal which lasts for a shorter period than your mortgage term may revert to the lender's standard variable rate or a tracker rate when the deal ends. Before you take out a deal, you should always try to find out from your lender what its standard variable rate is and how it will be determined in the future. Make sure you take all this information into account when comparing different deals.
Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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