With property yields on the increase, landlords are taking advantage of lower interest rates for buy-to-let mortgages to increase their property holdings – while others are increasingly re-mortgaging their portfolio to boost profits.
With yields now reaching 7.6%, up from 6.4% in the previous quarter, property landlords are increasingly looking to exploit falling mortgage rates to build their residential property portfolios.
However, not all properties saw the same improvement in yield with houses in multiple occupation seeing a dramatic rise from 9.5% to 11.8% in the last quarter.
The index reveals that landlords have significantly more purchasing power than they did in the summer and the gross yields have risen on all property types except for semi-commercial properties.
The yield for commercial lettings have dropped from their recent high of 11.4% to 9.8%.
Buy-to-let mortgages continue to be popular
Buy-to-let mortgages continue to be popular and the number of mortgage products on offer now stands at 484. That is 19 more than were being offered a few months previously and the number of lenders willing to offer buy-to-let mortgages remains the same at 27.
The index also reveals that loan-to-value ratios have remained stable at 68%.
David Whittaker, managing director of Mortgages for Business, said: “Landlords are being encouraged to increase activity with rates remaining low and yields being consistently high. Confidence is high among lenders and investors we should see even more growth in the sector.”
He added that the improving choice in mortgage products for landlords is also helping drive competition and bring about cheaper deals.
Buy-to-let mortgage providers grow in confidence
There is also the issue of some Irish banks and RBS turning away from property lending that is forcing some landlords to re-mortgage and enjoy better deals as other lenders see the potential returns on investment.
David is confidently predicting that the surge of interest in buy-to-let mortgage lending will increase as yields continue to climb and property prices increase.
Underlining this, David adds, is the continuing strong demand from prospective tenants which is helping to push rents up.
However, it’s not all good news as the estate agency Chesterton Humbert has warned that the government’s flagship Help to Buy scheme could yet force down rents in London as tenants find they have the means to buy a home.
The agency says rents could drop by 5% and leave a glut of empty buy-to-let properties on the market.
