New research indicates that buy-to-let investors are looking for lower-value properties, in an attempt to gain higher yields.
The latest Mortgage Search Tracker from the Mortgage Advice Bureau shows seven in ten landlords are actively searching for a mortgage on properties valued at less than £250,000. This indicated a sharp rise from the five out of ten recorded one year earlier.
Falling rates
A growing number of landlords are choosing higher loan-to-value (LTV) mortgages, with interest rates continuing to tumble. One in three landlords are looking for mortgages on properties with a value of less than £150,000.
This trend comes as house prices continue to rise, up by 5.2% over the last year. In London, the South East, South West and East of England, average property prices are more than £250,000.
‘As rental demand remains strong nationwide, opting for a cheaper property can result in more attractive yields,’ noted Brian Murphy, head of lending at the Mortgage Advice Bureau.[1]
‘It appears many landlords are looking to invest in areas outside the South of England, where property prices won’t hold them back from making a profit,’ he added.[1]
Murphy went on to say that buy-to-let investors are reaping the rewards of more competitive pricing. ‘Although higher LTVs generally mean more costly monthly repayments, falling rates mean landlords may find they can now afford higher-LTV products,’ he concluded. [1]
[1] https://www.landlordtoday.co.uk/breaking-news/2015/11/landlords-targeting-cheaper-properties