The rise in products and lenders is a result of the race to keep up with the demand from BTL investors as property prices wane and rental demand grows. Despite growth in the number of owner-occupier mortgages and loans suitable for first-time buyers, demand for rental property continues to push rents higher and drives the growth of average yields. Average yields from vanilla BTL mortgages rose to 6.3% in Q3 up from 5.8% in Q2.
Complex BTL deals continue to provide the best yields for professional investors. However, new products introduced over the last quarter aimed at investors looking to purchase smaller Houses in Multiple Occupation (HMO) have caused yields for this type of property to fall slightly. The average yield for HMOs is now 9.3% – down from 10% in Q2. These new products have also caused average LTVs for HMOs to rise to 66% from 60% and average loan sizes to fall from £321,836 in Q2 to £292,969 now.
Multi-unit Freehold Block (MUFB) deals continue to provide good returns for investors with yields rising over the last three months. Despite smaller properties being bought in Q3 (average loans are now £378,531 compared to £513,197 in Q2) the average MUFB mortgage yield is now 6.9%, up from 6.6% last quarter due to the quality of the accommodation being high. Average LTVs for MUFB deals rose to 64% from 59% last quarter.
David Whittaker, managing director at Mortgages for Business, commented:
“This is the third straight quarter in which the number of buy-to-let deals has risen in response to overwhelming demand from professional investors. However growth over the last three months slowed to 25% having risen 35% in the previous quarter suggesting a seasonal fluctuation during the summer. It will be interesting to see if the figure rises again at the end of the year. With the Base Rate set to remain low for the medium term, property prices falling and demand from tenants showing no signs of dropping, investors will continue to capitalise on the healthy returns available from the buy-to-let market.”
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