Its findings for Q4 2010 highlight several positive signs for the sector, including:
- An increase in loan size for mortgage offers obtained during the period
- A continuing rise in average rents
- Fixed rates growing in popularity
- Demand for remortgages increasing
Andy Young, chief executive at TBMC comments on the Index’s findings:
Buy-to-let loan size continues to increase
“We have seen a significant increase in the average loan size being obtained by landlords throughout 2010 with the largest increase occuring during the fourth quarter, up 10% on the previous quarter.
"The availability of some higher loan to value products and an increase in house prices contributed to this rise, together with the re-emergence of Paragon Mortgages; many of the applications for Paragon Mortgages via TBMC are for the purchase or remortgage of an HMO property, which tend be larger and therefore more expensive than the average buy-to-let property, driving up the average loan size.”
A steady in rise in rental income
“2010 has seen a steady increase in the average monthly rental income expected by landlords, coinciding with the widely reported rise in tenant demand across the UK. As demand increases and supply is limited, landlords have been able to increase their rents.
"At TBMC, we have recorded an increase in expected rental income of over 12% since the beginning of 2010. The largest increase occurred during the fourth quarter with a rise of over 7% compared with the previous quarter.”
“At the same time the percentage of mortgages offered for properties in the London and South East region is at its highest since we began tracking it and ended the year at 37%, up from just 16% at the end of 2009.
"As this region of the UK reportedly experienced some of the largest increases in rents recently, it could be the hottest area for buy-to-let investment.”
The popularity of fixed rates rockets
“During the course of 2010 we have see the growing popularity of fixed rates, as the pricing of fixed rates and trackers have converged.
"However, during quarter four the percentage of applications for fixed rates rocketed to a massive 63% up from 50% in the previous quarter. Interestingly, this was despite the average tracker rate offered during the period falling relative to the average fixed rate.”
“This trend suggests that landlords think that interest rates are at the bottom of the cycle and the only way for them to go is up. Fixing now gives them security over the next few years as the uncertainty over interest rate rises unfolds.”
Remortgage market is robust
“Concerns over the floundering remortgage market seem unfounded when looking at the buy-to-let mortgage business written by TBMC during 2010. During quarter one only 41% of applications were for remortgages compared with 59% for purchases, but the figure has increased progressively throughout the year and during quarter four the percentage of remortgage applications was up to 52%, overtaking purchases at 48%.”
“This trend also supports the view that landlords are anticipating a rise in interest rates in the next couple of years and are looking to remortgage now to secure lower rates before that happens.”
Conclusion
“2010 was an interesting year for the buy-to-let mortgage market and there are plenty of signs that the sector is starting to recover. As tenant demand and rental incomes increase, and if there is greater product choice for landlords, 2011 could present good opportunities for property investors looking to enter the market or develop their portfolios.”
