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Buy To Let Mortgage Upper Limits Rising

Buy to let mortgage upper limits are rising, allowing property investors to buy properties costing in the millions to rent out.

Many high-income individuals choose to rent property rather than buying, enjoying the extra flexibility that renting can offer. So, can buy to let property investors take advantage of high upper limits to enter the luxury housing market?

When offering home loans, lenders set maximum limits on how much they will offer to borrowers who meet their criteria. These upper limits can vary depending on the loan-to-value ratio (LTV) that you’re borrowing at – with lower LTVs sometimes offering higher limits.

The latest lender to increase upper limits on their buy to let mortgages is Coventry Building Society who has increased its maximum buy to let borrowing limit to £750,000, meaning it now offer mortgages on properties worth up to £1.5 million.

However, some other lenders already offer upper limits far higher than that on their buy to let products.

Metro Bank and Bank of China both offer buy to let investors maximum loans of £5 million at up to 60 and 65 per cent LTV respectively. This means that you could buy a property worth more than £8 million if you have a handy £3 million as a deposit.

Metro Bank will also offer up to £3 million at 70 per cent LTV, while Kent Reliance can offer the same upper limit at 75 per cent LTV.

If quite so large a deposit is a problem do not fear, Kent Reliance offers loans of up to £3 million at a much higher 80 per cent max LTV, meaning you can buy a property worth up to £3.75 million with just a £750,000 deposit. The same lender will offer up to £1 million at 85 per cent LTV.

Highest Buy to Let Upper Limits

LTV Lender Max loan Max property value
60% Metro Bank £5m £8.3m
65% Bank of China (UK) £5m £7.7m
70% Metro Bank £3m £4.3m
75% Kent Reliance £3m £4m
80% Kent Reliance £3m £3.75m
85% Kent Reliance £1m £1.2m

Source: Residential Landlord

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The main growth areas are specialist resi and buy-to-let

The main growth areas in the mortgage market are specialist residential and buy-to-let, Louisa Sedgwick, director of sales for mortgages at Vida Homeloans, has argued.

Sedgwick said education is needed to help brokers understand specialist areas. Vida provides webinars, workshops and regional blogs by key account managers.

One area Vida has seen an uplift in is expat buy-to-let since the 2016 EU Referendum.

Sedgwick said: “Any growth in the market has to come from the specialist area and the more education there is, the greater the market will grow. We’re trying to find different ways of educating brokers.

“Before we voted to leave prices were more expensive and since the vote have dropped, making the property market more vulnerable.”

Payam Azadi, director of Niche advice, agreed and said he’d done more expat buy-to-let business this year than previous years.

He added: “As lenders start looking for more margin and diversifying their proposition, they’re going to be going into the more specialist sectors.

“We have seen a lot of lenders diversify firstly into specialist buy-to-let, for example, lending on houses in multiple occupation (HMOs) and expat buy-to-let, but there’s also other sectors lenders have moved into.

“There’s another batch of lenders looking to loosen criteria around adverse credit and others looking at affordability. There are a number of strategies from different lenders. It depends on how they’re funded and what the funders’ risk models are and what margin lenders have to give back to their funders.

“Within the specialist market margins are under pressure, so it’s great saying you’re going into this sector but it’s about how much money you can make there. You’ve seen lenders look at different areas to give edge over competition.”

By Michael Lloyd

Source: Mortgage Introducer

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Older Generation Making More Buy To Let Property Investments

The older generation are making more buy to let property investments, as they look to supplement or even replace pensions.

According to new research from Commercial Trust, the older generation showed a notable rise in the number of buy to let mortgage applications in 2018.

Commercial Trust saw older borrowers aged between 65 and 75 increase their share of buy to let mortgage applications by 5.43 per cent in 2018, compared to just a 0.03 per cent rise for 25-34 year-olds.

The buy to let broker also reported a 4 per cent increase in the proportion of buy to let purchases and remortgages from over 55s, who now account for 39 per cent of all buy to let activity.

For purchase only applications, older investors over 55 were responsible for 29.7 per cent of all business in 2018, an annual increase of 8 per cent.

Older buy to let mortgage applicants are being encouraged by a number of lenders, who have increased the maximum age permitted at both application and at the end of the mortgage term.

Santander now cater for older investors by recently increasing their maximum age at the end of the mortgage term criteria from 75 to 85 years old and the maximum mortgage term on its buy to let range from 25 years to 40 years.

Precise now has a maximum application age of 80 on a maximum term of 35 years, while The Mortgage Works sets no maximum age at term end for experienced landlords.

Chief executive at Commercial Trust, Andrew Turner, said: ‘Our look at the age demographics for 2018 buy to let mortgage activity, suggests that increasing numbers of older people are recognising the potential of buy to let investments.

‘Our data indicates that many people reaching retirement are choosing to invest in bricks and mortar and the rental market as a means to fund their retirement years.

‘Investing in property has the potential to deliver attractive rental yields and achieve capital growth, despite industry changes. I fully expect that the returns fair better than many other forms of investment.’

Source: Residential Landlord

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Number of landlords in arrears up 12%

The number of buy-to-let mortgage holders in significant arrears has increased by 12 per cent since last year, according to new data from UK Finance.

The trade body’s mortgage arrears and possessions update, published today (May 9), showed there were 1,200 buy-to-let mortgage properties in serious arrears — 10 per cent or more of the outstanding balance — in the first three months of 2019.

This was 12 per cent greater than in the same period in 2018.

The total number of buy-to-let mortgaged properties in any arrears, 2.5 per cent or more of the balance, increased by 3 per cent to 4,620 in Q1 2019.

The residential market fared better as the new data showed the number of homeowners in arrears remained at a historic low.

There were 76,580 homeowners in low level arrears in the first three months of 2019, down 4 per cent on the same period last year, and the number of consumers in serious arrears decreased by 3 per cent.

Arrears led to 1,380 residential properties and 570 buy-to-let mortgaged properties being repossessed in the quarter.

For the buy-to-let market, this meant repossessions fell by 14 per cent while for residential mortgages, the number of houses repossessed increased by 10 per cent.

UK Finance stated the increase in possession in the residential market had been driven in part by a backlog of historic cases and stressed that the total remained well below the levels seen between 2009 and 2014.

Commenting on today’s findings, Jonathan Harris, director of mortgage broker Anderson Harris, said: “Encouragingly, there has been a further fall in the number of homeowners in mortgage arrears, with numbers at historically low levels.

“The vast majority of borrowers are paying their mortgage in full and on time each month, perhaps not surprising when one considers how low interest rates are.”

But Mr Harris stressed there was no room for complacency in terms of mortgage repayments and said borrowers should plan ahead and consider how they would cope if interest rates were to rise.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Buy-to-let landlords are falling into arrears from the pressure of tax and regulatory changes, as we might have expected.

“These figures also show that there is little appetite among lenders to repossess because they are not going to do too much better than the owners themselves in achieving a sale at a reasonable price.”

According to Mark Pilling, managing director at Spicerhaart Corporate Sales, the increase in buy-to-let properties in arrears could be down to the fact that many private landlords were looking to get out of the sector as a result of regulatory change.

This rise, he said, could be down to the fact that some tenants who have been given notice are now not making their rent payments.

He added: “In terms of residential mortgages, arrears are down slightly but possessions are up by 10 per cent, a fairly significant increase. And while they are still not at the levels seen after the financial crisis, they are slowly creeping up.

“And I think we will now see these residential possession numbers continue to increase every quarter, ballooning at the end of the year as borrowers start to run out of options to get themselves out of difficulty. And while forbearance is still an option for some, lenders need to look at all the circumstances of each customer and get the right strategy in place.”

In January, the Intermediary Mortgage Lenders Association warned the introduction of various tax and regulatory changes since 2015 would begin to have an effect on property availability and tenant choice in the rental sector as landlords began to feel the pinch of new regulation.

Landlords have been subject to a number of regulatory changes in recent years, with the introduction of an additional 3 per cent stamp duty surcharge on second homes in April 2016, which was closely followed by cuts to mortgage interest tax relief.

Buy-to-let borrowers are also now subject to more stringent affordability testing under the Prudential Regulation Authority’s tightened underwriting rules.

By Imogen Tew

Source: FT Adviser

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Andrew Turner: Landlords should consider remortgages

Now is the time for landlords to review their existing portfolios and consider remortgaging to a lower, fixed rate buy-to-let mortgage, Andrew Turner, chief executive of Commercial Trust has argued.

He said this because of a variety of products in this competitive market, and the base rate being held at 0.75% yesterday, with Bank of England governor Mark Carney warning of possible interest rate rises in the future.

Turner (pictured) said: “The present window of opportunity for what may seem favourable buy-to-let conditions in a few months’ time, may be closing.

“For landlords with a buy-to-let mortgage on a variable or tracker rate, the implications of a rates rise or fall can change their annual payments by hundreds of pounds

“In an atmosphere where rates are almost at historic lows, the prospect of monthly payments increasing on a variable or tracker rate mortgage, should the Bank increase the base rate, will seem very unappealing.

“A fixed rate mortgage is safeguarded against base rate changes for the duration of its term, while variable and tracker rate mortgages might be susceptible to any changes. Mr Carney’s suggestion is that rates are more likely to go up rather than down.”

Moneyfacts has found that there are over 2,000 products available in the buy-to-let market now, a 12-year high.

Turner added: “A conversation with a specialist buy-to-let broker, can help to identify a clear strategy and the right type of buy-to-let deal for individual circumstances, faced with such choice.”

With a sluggish housing market, Turner said that tenant demand remains undiminished, as those unable to afford to buy a home, seek accommodation in the private rental sector.

He suggested for those with money to spend, the current environment may offer opportunity to invest in buy-to-let with lower house prices, soaring tenant demand and historically low interest rates.

Turner said: “I would suggest anyone holding off at the moment, faced with these facts, to consider what they are waiting for?

“The bigger question is how long current conditions will last? Mr Carney’s suggestion is that a change in interest rates is just around the corner. That could mean that the competitive deals currently available, may soon evaporate with any base rate change.

“So, whether you are a first-time landlord or considering remortgaging, while time is currently on your side regarding interest rates, how long will that last?”

By Michael Lloyd

Source: Mortgage Introducer

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Professional landlords call for manual underwriting process

Over a third of property investors want buy-to-let lenders to apply a manual underwriting process for professional landlords, as they struggle to obtain buy-to-let mortgages off the high street, MT Finance’s has found.

The lender’s Property Investor Survey showed almost half (42%) of property investors said they had struggled to secure a mainstream buy-to-let mortgage in the last 12 months, with 54% citing affordability criteria as the primary barrier to mainstream funding.

Gareth Lewis, commercial director at MT Finance, said: “The results from our Q1 2019 Property Investor Survey reflects the impact of stricter affordability and stress testing from high-street lenders on professional property investors’ ability to obtain mainstream funding.

“The need for reliable, transparent, and quick access to funds is ever-critical and specialist finance- such as bridging loans, will continue to pick up when a more personalised approach to underwriting is required.

“With highly professional specialist lenders offering flexible products at competitive rates, bridging finance has become an attractive proposition to those property investors who are looking to expand their portfolio and need certainty when conducting their business and who often need to move swiftly to capitalise on an opportunity.”

This was followed by age restrictions at 32% and insufficient deposit capital at 14%.

Yet, 46% of those unable to obtain a buy-to-let mortgage filled the funding gap with other sources of liquidity, as 50% of those opted for bridging loans, 34% refinanced through a specialist buy-to-let lender, and 16% opted for a secured loan.

As a result, 58% of the 125 property investors surveyed did not think buy-to-let lenders are doing enough to support them.

When asked what mainstream buy-to-let lenders could do to better support them, 36% said applying a manual underwriting process for professional landlords would better support them, followed by increasing LTV thresholds at 32% and relaxing age restrictions at 26%.

By Michael Lloyd

Source: Mortgage Introducer

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Biggest choice in buy-to-let mortgages since 2007 for landlords

The number of buy-to-let mortgages has soared to 2,163, the highest since before the financial crisis hit in October 2007, according to research from Moneyfacts.co.uk.

In March 2017 the average two year fixed rate was 2.96 per cent and that has now gone up to 3.12 per cent following the Bank of England rate rise last year.

The average five year fixed rate in March 2017 was 3.77 per cent and but that has now fallen slightly to 3.61 per cent.

Darren Cook, finance expert at Moneyfacts.co.uk, said: “It is encouraging that buy to let landlords have more mortgage choice than they have had at any time in almost 12 years.

“Total product numbers have increased by 397 over the past year and by 706 over the past two years.

“Despite ongoing uncertainty in the property market, providers are not shying away from offering landlords a greater choice of products, although it is also evident from our research that heightened competition to try and attract buy-to-let business has not resulted in a fall in interest rates, as has recently happened in the residential mortgage sector.

“Indeed, the average two year fixed buy-to-let mortgage rate has increased by 0.20 per cent to 3.12 per cent since September 2018 and the average five year fixed rate has increased by 0.15 per cent over the same period.”

He argued that the recent increases to buy-to-let mortgages interest rates have been a result of mortgage providers attributing a little more to risk into their product rates due to uncertainty over future economic conditions.

Source: Simple Landlords Insurance

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Ipswich cuts buy-to-let rates and launches later life product

Ipswich Building Society has reduced the rates and fees on its existing buy-to-let 5-year fixed rate products and launched a product to its existing range of later life mortgages.

Both buy-to-let rates are a 5-year fix. There’s a 3.75% at 80% LTV, with a completion fee of £950 and an expat buy-to-let at 3.99% and 75% LTV with a completion fee of £999.

There’s also a 5-year fixed later life fixed rate at 3.50% and 75% LTV with a £500 completion fee and minimum loan of £25,000.

Richard Norrington, chief executive at Ipswich Building Society, said: “By recognising buyers’ demand for longer term mortgage products at this time, and adjusting our rates to reflect this, we are pleased to offer our borrowers stability with regards to their monthly mortgage commitments.

“Landlords, including those based overseas, and older borrowers often have an unusual set of circumstances or changing lifestyles and incomes.

“Our manual underwriting approach, which sees real people making the decisions about affordability, allows us to assist borrowers who may otherwise be denied access by the automated approach deployed by some mortgage lenders.”

All deals are available from five to 40-year terms up to a maximum loan of £500,000 and have an application fee of £199, CHAPs fee of £35 and a tiered valuation fee based on property value.

For standard buy-to-let and later life remortgage applications, there is a free valuation up to property value of £1m and fee assisted legals.

During the fixed rate period the products offer fee-free overpayments up to 50% of the original loan amount.

Source: Mortgage Introducer

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Buy To Let Mortgage Choice Hits New High

The choice in buy to let mortgage products has hit the highest level seen since before the global financial crisis.

Figures released by Moneyfacts have shown that landlord choice when it comes to buy to let mortgage finance products has increased hugely over the past few years.

Total product numbers have increased by 397 over the past year and by 706 over the past two years to now give buy to let investors a total choice of 2,162 products today.

The choice in buy to let finance products has not been higher since October 2007, when 3,305 products were available.

Interest rates on buy to let mortgages have started to creep up however, despite the huge choice. The average two-year fixed buy to let rate has increased by 0.20 per cent to 3.12 per cent since September 2018 and the average five-year fixed rate has increased by 0.15 per cent over the same period.

Finance expert at Moneyfacts, Darren Cook, said: ‘It is encouraging that buy to let landlords have more mortgage choice than they have had at any time in almost 12 years.

‘Despite ongoing uncertainty in the property market, providers are not shying away from offering landlords a greater choice of products, although it is also evident from our research that heightened competition to try and attract buy to let business has not resulted in a fall in interest rates, as has recently happened in the residential mortgage sector.’

He continued: ‘As there appears to have been no sustained increases in interest SWAP rates since September 2018, a strong argument can be made that the recent increases to buy to let mortgages interest rates have been a result of buy to let mortgage providers attributing a little more to risk into their product rates due to uncertainty over future economic conditions.’

Source: Residential Landlord

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Number of buy-to-let mortgages at post-crisis high

The number of buy-to-let (BTL) mortgage products on the market has reached a post-financial crisis high giving landlords the most choice in nearly 12 years.

Almost 400 BTL products have been added to the market in the last year, taking the total to more than 2,000 and the highest number since October 2007, when 3,305 deals were available.

According to Moneyfacts there are 2,162 BTL deals available today – up from 1,765 last March and 1,982 in September, including 467 for limited company landlords not using special purpose vehicles.

However, in contrast to the residential mortgage market, where intense competition is driving interest rates down, BTL lenders have pushed rates up over the last five months.

Between March 2017 and September 2018 the average two-year fixed rate buy-to-let mortgage was around 2.86% to 2.96%. However, it is now at 3.12%.

The average five-year fixed rate deal has also increased since September 2018, rising from 3.46% to 3.61% – although this is not quite as high as the 3.77% in March 2017.

For limited company products not involving special purpose vehicles, the average two-year fixed rate is at 4.08% and the average five-year fix is at 4.53%.

Moneyfacts spokesman Darren Cook said: “The disparity in the direction of movement between BTL and residential interest rates may be due to the way these two types of lending are primarily assessed. BTL mortgage providers generally consider the potential rental income and affordability during assessment, whereas residential mortgage providers typically look back at income earned by the borrower and affordability.”

Source: Your Money