Record rents are letting landlords collar higher loan to value deals from buy to let lenders.
Brokers TMBC claim more than half of loans processed in the second quarter were for loan-to-values of 70% plus as lenders accepted higher rents would support higher borrowing levels.
Favourite mortgage rate options for property investors were fixed deals at an average 4.82% and trackers at 4.20%.
Rising rents and sluggish house price changes have led to higher yields. The TBMC index shows average buy to let yields across the UK for the second quarter were 6.25%, but varied considerably according to location, property type and who occupied the home.
Buy to let hot spots are London, Bristol, Coventry, Chester, Southampton, Cardiff and Sheffield, say TBMC.
Terraced houses offer the biggest average rental yields (6.65%), followed by flats (6.06%).
Students generate the highest yields (7.52%) because student properties are often let out on a room-by-room basis.
The next highest yields are provided by families (6.32%) and professionals (5.89%).
Students in terraced houses produce the greatest yield of all (7.77%).
A snapshot of the index for the second quarter shows:
• Average loan size: £138,525 - up from £136,359 in the first quarter
• Average loan-to-value: 67.17% - up from 66.35%
• Average chosen fixed rate: 4.82% - down from 5.0%
• Average chosen tracker rate: 4.02% - down from 4.2%
Andy Young, chief executive of TBMC, said: “The buy-to-let mortgage market has continued to develop during the second quarter with a greater number of products available to landlords. During the period, the number of mortgage schemes grew by 25% compared with the previous quarter.
“Average loan sizes also increased mainly due to the greater number of lenders offering higher loan-to-value mortgages and the availability of finance for houses in multiple occupation (HMOs), which tend to be higher value properties.”
