Buy-to-let mortgage offers in quarter three 2011:
Average rent:
- Q3 2011: £1068.25
- Q2 2011: £1009.87
- Change during Q3 2011: +£58.38 (+5.78%)
Average rental yield:
- Q3 2011: 6.37%
Average chosen fixed rate:
- Q3 2011: 5.03%
- Q2 2011: 4.82%
- Change during Q3 2011: +0.21%
Average chosen tracker rate:
- Q3 2011: 4.10%
- Q2 2011: 4.02%
- Change during Q3 2011: +0.8%
Andy Young, chief executive at TBMC comments on the Index’s findings:
Eurozone troubles affect product pricing
“During the second quarter of this year the average variable rate for offers processed by TBMC dropped to its lowest in over 18 months (4.02%), which was attributed to persistent low interest rates and improved competition in the mortgage marketplace.
"However, during the third quarter there has been a small increase to the average variable rate rising to 4.10%. The average fixed rate has also increased from 4.82% to 5.03%.
“The observed rate increase is likely to be a result of continuing problems in the eurozone including the huge financial bailout for Greece.
"This in turn has affected the money markets and increased the price of funding. It is probable that product rates would have risen further had there not been increased competition amongst lenders in the buy-to-let mortgage market."
Growing demand for variable rates
“Continuing the trend since the beginning of 2011, the last quarter saw a further increase in the proportion of buy-to-let applications for variable rate products.
"This reflects the weight of expert opinion that Bank of England base rate will remain low for some considerable time, certainly well into 2012. In quarter three 62% of applications received by TBMC were for variable rates with just 38% for fixed rate mortgages.”
Higher level of remortgages by existing landlords
“During quarter three 53% of offers were for remortgages, which suggests that existing landlords are looking to release equity in order to expand their portfolios.
"This improvement in the remortgage market can be attributed to an increase in the number of good deals available specifically for refinancing and evidence that house prices may have bottomed out, providing suitable conditions for further property investment.
"Also noteworthy is that around 85% of offers were made to people who are 40 years old or over, compounding the finding that experienced landlords are now remortgaging.”
More families opting to rent
“One of the most noticeable trends since the beginning of the year is the growing proportion of families who are renting accommodation. In quarter three 65% of tenants were families compared with just 41% in quarter one.
"This reflects the continuing difficulties that first time buyers are having getting a mortgage, putting them off purchasing their own home until later on in life. Renting is also a more preferable option for families who want flexibility in terms of where they live.”
Greater rental yields to be gained outside London
“Unsurprisingly, the results of the Index show that London is the most popular location for buy-to-let investment with over 14.7% of mortgage applications received for properties in the capital city of England.
"However, the results also show that London does not, on average, generate the highest rental yields. London produced an average rental yield of 5.66% which is lower compared with other popular cities such as Manchester (7.03%) and Cardiff (7.55%).
"Although properties in London can command a higher rent, they are also more expensive to buy which affects the overall rental yield.”
Rents remain high
“The last 12 months has seen steady growth in the rents charged by landlords, with the average expected rent in the last quarter at £1068.25 compared with £813.96 during the same period in 2010, representing an increase of over 30%.
"This is very encouraging news for landlords and demonstrates the growing vitality of the buy-to-let market, as key drivers such as tenant demand remain strong.”
