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Average yields rise to 10 per cent on complex Buy To Let deals

This rise in the number of products is a result of an increased number of lenders (now 22 compared to 19 in April) and the demand from BTL investors for more product diversity. Demand for rental properties continues to outstrip supply and this has pushed rents higher and driven the growth of average yields. Average yields from vanilla BTL mortgages rose to 5.8% from 5.6% in April.

Complex BTL deals continue to provide the best yields for professional investors. Houses in Multiple Occupation (HMO) mortgages are now offering average yields of 10% – up from 9.3% last quarter.  Average LTVs for HMO deals has fallen to 60% from 63% in April. Lending conditions have improved in this sub-sector thanks to increased competition in the market from new entrants such as KRBS and Whiteaway Laidlaw Bank and continued support from Paragon, TMW and Aldermore.

Multi-unit Freehold Block (MUFB) deals also provide good returns for investors but yields have fallen The average MUFB mortgage yield is now 6.6%, down from 7.4% last quarter however this is due to a rise in higher value MUFB purchases over the last three which has put downward pressure on average yields. Average LTVs for MUFB deals have risen to 59% from 56% last quarter.  However, lenders looking to reduce their risk exposure are forcing MUFB investors to refinance elsewhere. This quarter, the proportion of purchases versus remortgages in this sector were 19% versus 81%. A dramatic swing from the 41% (purchase) versus 59% (remortgage) last quarter.

David Whittaker, managing director at Mortgages for Business, said:

“Languishing property prices and rising rents have created a perfect storm for professional investors and landlords. The yields on offer on investment properties are incredibly lucrative and with the owner-occupier market unlikely to change dramatically over the next eighteen months the returns for investors will be healthy for some time to come.”

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