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Demand from buy to let landlords for remortgages likely to rise in 2016
Buy to let remortgage transactions outstripped purchases by more than two to one in 2015 but this could be reversed in 2016, according to the latest industry sector index report. Remortgages for vanilla buy to let property accounted for 64% of transactions with Houses in Multiple Occupation (HMOs) and Multi-Unit Freehold Blocks (MUFBs) seeing even greater remortgage activity at 78% and 88% of transactions respectively, the data from specialist brokers Mortgages for Business shows. The results aren’t surprising, according to David Whittaker, managing director of Mortgages for Business. ‘For some time now landlords have been making considerable savings through remortgaging. Many have also been releasing equity to make improvements and plan further purchases,’ he said. ‘However, I anticipate that we will see a reversal of this trend in the first quarter of this year as landlords hurry to expand their portfolios before the stamp duty surcharge kicks in on 01 April,’ he explained. ‘The number of enquiries for purchase finance is already well ahead of where we were this time last year, particularly from those looking to sell their personally owned property into a corporate vehicle,’ he added. Although yields across all property types rallied in the fourth quarter of 2015, in real terms they continue to plateau as rental income fails to keep pace with rising property prices. However, returns for the more complex properties remain healthy and well above the psychologically important 6% mark. The number of lenders operating in the market remained static at 33. However, the number of buy to let mortgage products available to borrowers grew slightly to an average of 975. ‘It is unlikely that this average figure will be topped going forward unless new lenders enter the market, or some of the existing providers start to offer products to limited companies. Of course, that figure is only an average, at one point at the beginning of December our tracking system showed 1,168 products,’ Whittaker pointed out. Continue reading
Asking prices in UK still going upwards, latest index shows
The average asking price England and Wales has increased by 8.2% year on year while the total stock of property had dropped to a new record low, according to the latest residential index. Month on month prices increased by 0.3%, the highest such rise observed for January since the onset of the financial crisis and is at odds with the normal seasonal trend, the data from Home.co.uk shows. The index report says that growth in the property market is due to a lack of supply and low mortgage rates and the typical time on market is 117 days across England and Wales, nine days less than in January 2015. Despite a small uptick in supply, the total number of properties on the market has fallen to a new low. Just over 386,000 properties are currently for sale, some 47% less than in 2008. This trend looks set to dominate the UK property market in 2016, the report says. ‘Sellers know full well that there is a shortage of supply and therefore see no need for cautious pricing. Consequently, prices jumped nearly a percentage point over the last month in Greater London, which corresponds with an additional £15,000 on the average home value,’ said Doug Shephard, director at Home.co.uk. All the regional property markets have shown significant improvements in marketing times over the last year. The biggest improvements were in the South East and East of England where competition is fierce and these two regions also experienced the largest price hikes outside of Greater London in 2015. ‘We expect that home values in these regions will rise further this year before cooling as prices become out of reach of most buyers, thereby subduing demand. Perhaps surprisingly, the next best improved markets in terms of reductions in median time on market were the formerly lacklustre North East and Yorkshire regions,’ Shephard explained. ‘This serves as a strong indication that a recovery, until now notably absent, is beginning to take place in these regions as properties begin to move through the market more quickly and the supply demand balance tips in favour of the vendor,’ he pointed out. ‘We expect the first significant price rises post-crisis to be observed in these regions in 2016. The recovery in home values in the West and East Midlands is already well underway and their marketing times continue to improve. We expect increased price rises in these regions this year due to a combination of increased scarcity and buyer demand,’ he added. Shephard also pointed out that the North West property market is also showing signs of incremental improvement and is expected to see price rises in 2016 higher than last year. ‘It is interesting to note that Greater London heads up the four regions which have the least improved marketing times over the last year. Overall, the London market appears to be in a mature post-recovery phase where the breath taking price hikes of the last six years have… Continue reading
Surge in demand for buy to let funding via limited companies from UK investors
The decision by the UK government to charge an extra 3% in stamp duty on but to let property buyers from April this year has led to a sharp increase in demand for limited company lending. New research shows that property investors looking for finance using a limited company has increased and at the same time the number of buy to let lenders offering finance to limited companies has also risen. The latest index from Mortgage for Businesses, covering the second half of 2015 shows that new applications for limited company buy to let mortgages had dipped to 15% of all buy to let applications in October but, then, almost immediately started to rise sharply, spurred on by the stamp duty surcharge announcement. By December, new limited company buy to let applications accounted for just over 38% of all buy to let applications. Completions for limited company buy to let mortgages accounted for nearly 22% of all buy to let completions in October, up from nearly 17% the previous month and this increased to 24% in December. ‘The increase in limited company buy to let activity is to be expected since the proposed restrictions to buy to let mortgage interest relief for individuals paying the higher tax rate were announced by the government in the Summer Budget,’ said David Whittaker, managing director at Mortgages for Business. ‘Operating portfolios via corporate structures is expected to be more tax efficient, particularly for higher tax rate-paying individuals, including individuals where the new tax regime will tip them into the higher tax bracket where previously they had remained below it,’ he explained. ‘The stamp duty surcharge has also had a direct impact on activity with investors trying to get purchases completed before 31 March 2016, particularly as the actual rules where the surcharge will apply will not be confirmed until 16 March 2016,’ he added. The index also shows that almost a third of buy to let lenders offered products to limited companies in the second half of the year, up from 23% in the first half of 2015. However, by the end of December this figure had risen to 36%. The number of products for limited company applicants increased by nearly 50% to an average of 147 in the second half of 2015, up from 99 in the first half of the year. ‘It’s good to see that the results continue to disprove the theory that there are insufficient products available to limited companies. It’s also interesting that pricing has come down, if only marginally. I wouldn’t be at all surprised if rates for limited companies reduced further in the coming months but I doubt we’ll see huge falls,’ said Whittaker. In December 2015 products for limited companies were, on average 0.7% points more costly than the market as a whole, a marginal reduction compared to July when it was 0.8%. The average limited company rate in December was 4.4%, down from 5.4% in July. Across… Continue reading
