New research has revealed that the costs of certain buy-to-let mortgages have fallen.
After a spike during the months of February and March, it has been noted that some popular five-year fixed rate buy-to-let mortgages have seen a drop in fees. Many of these are now cheaper than they were a year ago in April 2018.
This research, from online mortgage broker Property Master, also shows that product fees for such mortgages have increased, sometimes by as much as £335.
The cost of five-year fixed rate offers for 50% of the value of a property fell by £8 a month between March and April, according to Property Master’s April 2019 Mortgage Tracker. Year-on-year, this type of mortgage was down in cost by £28 a month.
The tracker also shows that the cost of a five-year fixed rate for 65% of the value of a property fell by £4 each month, and by £18 per month, when compared to year-on-year data from April 2018.
Five-year fixed rates for 75% of the value of a property stayed at £408 March to April, but fell year-on-year by £18 a month.
However, a sharp year-on-year increase in average product fees can be seen for almost all of the available fixed-rate buy-to-let mortgages categories that were tracked.
Fees for a two-year fixed rate for 50% of the value of a property saw major growth, from £714 in April 2018 to £1,599 today – an increase of £885.
On top of this, five-year fixed rates for 50% of the value of a property, which increased by £335 in April 2018 to today, from £1,164 to £1,499.
Figures for this month’s Mortgage Tracker were calculated on deals available on 1st April, 2019.
Angus Stewart, Property Master’s Chief Executive, commented: “It is good news that the type of deals many landlords favour have fallen back a little in cost after last month’s increase. Better still the headline rate for many of these offers are actually less than they were a year ago.
“However, there is something of a catch in the increase in many product fees. Applying for a buy-to-let mortgage can be a complex process and it is important landlords compare the total cost of the mortgage they are offered.”
Annual house price growth edged up in March, but is down on a monthly basis, according to the latest House Price Index from Halifax.
Annual house price growth stood at an average of 3.2% in March, taking the typical property value in the UK to £233,181.
While house price growth also rose on a quarterly basis (1.6%), the average property value fell by 1.6% month-on-month.
Halifax also looks at housing activity across the UK market, using the latest industry figures.
UK home sales remained steady in February, with 101,780 transactions, which, as for January, was very close to the five-year average of 101,135. When comparing sales in December-February against September-November, there was a 0.4% drop. Home sales in February were 2.8% higher than the previous 12-month average.
In February, mortgage approvals fell compared to January. Bank of England figures show that the number of mortgages approved to finance home purchases – a leading indicator of completed property sales – dropped by 3.5%, to 64,337. This compares to an increase of 3.6% in the previous month. As a result, the mortgage approval figure is back to being very close to that recorded in December. The February rate is 1,892 lower than the five-year monthly average of 66,229, and is down by 740 on the previous 12-month average.
The UK Residential Market Survey from the Royal Institution of Chartered Surveyors (RICS) again showed a decline on almost every measure reviewed. The average stock per surveyor is now 41.7 – its lowest ever level. New enquiries, instructions and sales all fell again in the month. Price and sales expectations showed a small improvement compared to January, but both expectations remain firmly negative.
Annual House Price Growth Edges Up, but is Down Monthly
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Russell Galley, the Managing Director of Halifax, says: “The average UK house price is now £233,181, following a 1.6% monthly fall in March. This reduction partly corrects the significant growth seen last month and, again, demonstrates the risk in focusing too heavily on short-term, volatile measures. Industry-wide figures show that the number of mortgages being approved remains around 40% below pre-financial crisis levels, and we know that lower levels of activity can lead to bigger price movements.
“The more stable measure of annual house price growth rose slightly to 3.2% and is still within our expectation for the year. The need to build up a deposit before getting a mortgage is still a challenge for many looking to buy a property. However, the combined effect of fewer houses for sale and fewer people looking to buy continues to support prices in the long-term.
“These conflicting challenges, when combined with the ongoing uncertainty around Brexit, have had an impact across the country, but, most notably, in London, meaning that we continue to expect subdued price growth for the time being.”
Conor Murphy, the CEO of mortgage software provider Smartr365, responds to the report: “Continued price growth indicates a resilient housing market, despite uncertainty around Brexit. Depending on if, and when, there is greater clarity, transaction volumes will likely increase as we move into spring.
“It’s essential that advisers have the tools in place to deal with a seasonal increase. Using end-to-end platforms is one solution. By reducing admin processes, this frees up time for advisers to focus on what matters most – providing advice and generating new business.
“Wider-scale uncertainty could alter the mortgage landscape in the coming months, so borrowers need to make sure they’re getting expert advice from brokers to help navigate the market and choose the best deal for them.”
Lucy Pendleton, the Founder Director of independent estate agent James Pendleton, also reacts: “The UK housing market is proving as unpredictable at the moment as the daily Brexit negotiation updates.
“Last month’s figures totally blindsided all commentators, and even stoked a little controversy with concerns aired over the credibility of the index.
“It’s no surprise to see prices fall back this month, as low stock levels and general buyer malaise plagues the market.
“The annual figures are a more reliable indicator of market conditions, with much of the growth in house prices figures outside London. There are few signs of improvement in the number of transactions across the capital.
“Buyers are understandably showing caution while we remain in this period of limbo, possibly in the belief there will be better opportunities to broker a deal after we leave the EU.”
An investment portal has highlighted so-called diamond buy-to-let hotspots for landlords in 2019 – all of which are located in the north of England.
One & Only Pro has found that property investors can earn more than double the 8% yield currently aimed for by the average landlord, by using data more effectively.
It reports that, if investors identify the best deals in the best buy-to-let locations – rather than looking at the typical return for the whole area – they could secure net yields well in excess of 20%.
One & Only Pro has identified the proportion of diamond property investment opportunities in the UK’s top ten buy-to-let hotspots. The portal categorises investment deals as diamond if they receive a score of ten on the platform.
The top score out of ten means that the opportunity has the highest possible chance of increasing in value. The scores are calculated by One & Only Pro’s unique algorithm, which considers a range of key factors, data and metrics.
According to the data, the UK’s top ten buy-to-let investment hotspots are all located in the north of England, with Darlington, County Durham taking the top spot for the area with the highest proportion of diamond properties, at 22%.
The top five locations with the highest proportion of diamond properties is made up by Bootle, Merseyside (21%), Burnley (21%) and Blackpool (19%), both in Lancashire, and Washington, County Durham (18%).
So-Called Diamond Buy-to-Let Hotspots Revealed in the North of England
One & Only Pro’s study has also revealed the average price of the top ten diamond properties in the selected areas, with Burnley offering the most affordable deals, at an average price of just £37,000, which is highly likely to increase in value.
Other diamond hotspots with low average entry level prices include: Bootle (£53,000), Darlington (£56,000), Grimsby (£56,000) in Lincolnshire, and Sunderland (£63,000) in Tyne and Wear.
When it comes to returns, the top performing area was Liverpool, with an average return on cash investment of 78.2% for one of the top ten diamond properties in the Merseyside city. The return on cash investment is based on buying a property with the best mortgage deal.
Other standout performers for One & Only Pro’s average return on cash investment on diamond properties in the top ten buy-to-let hotspots include: Sunderland (68%), Washington (62%) and Burnley (61%). All of the top ten register an average return on cash investment of more than 35% for their top ten diamond properties.
Henri Sant-Cassia, the CEO of One & Only Pro, says: “It’s shocking that people think buy-to-let is dead or is no longer a good investment, as the real data shows something completely different.
“One & Only Pro can highlight the highest returning properties in the best buy-to-let hotspots in seconds.”
He explains: “As we can see, investors in Liverpool can earn almost 80% return on investment. This figure includes the costs of buildings insurance, a gas safety check, service charges and ground rents, and it is all calculated automatically on our website.
“With this kind of return, savvy investors could have earned their deposit back within two years. In many cases, in the above locations, a property’s mortgage could be cleared from the returns within several years and you’ll then have full ownership over your investment.”
Sant-Cassia believes: “While some people have been delaying decisions due to Brexit, the shrewdest investors could already have earned enough income to purchase their next property.
“Where else could you invest and earn returns like this? What’s more, you have the backing of bricks and mortar, which will always have some kind of intrinsic value. As we know, stock investments could always get wiped out and be worth nothing.”
People who live alone are more likely to rent their homes than those living with a partner, ideal flatmate has found.
According to Office for National Statistics (ONS) data, the cost of living alone has hit a huge 92% of the average income, making it far harder for single people to get onto the property ladder.
The figures also show that the number of those who live alone is continuing to rise, up by 16% to 7.7m of all households over the 20 years from 1997-2017. This is projected to hit 10.7m by 2039.
The greatest expenditure for those who live alone is housing costs, including rent and bills.
Households in the 25-64-year-old age range who live alone are less likely to own their own homes than couples, at just 50% of households, compared to 75% respectively.
This means that people who live alone have fewer opportunities to accumulate wealth through purchasing property and paying off a mortgage, with some homeowners having benefitted from significant house price growth.
Tom Gatzen, the Co-Founder of ideal flatmate, says: “While we are currently seeing an upward trend in single occupant living, as a result of a growing population and social factors, such as an increase in divorce rates, we are also seeing a similar increase across other living habits, such as co-living.
“While living alone is more prevalent across older age groups, we’re seeing a growing preference amongst younger generations to live in share households. This is not only helping them to address the financial issues head on, but can also help with other disadvantages associated with living alone, such as a lower level of wellbeing.”
He believes: “If properly considered and developed, this lifestyle trend could go some way in addressing the predicted uplift in those living alone over the next two decades and the negative impact that this could have on this segment of the population.”
If you’re looking to let to millennial tenants, then it’s essential that you know which areas they want to live in, in order to help you make sound investment decisions.
The slump in UK homeownership, from 73% a decade ago to just 63% today, reflects the fact that more households are now renting from private landlords, particularly among the millennial population.
Homeownership rates among millennials have collapsed even more dramatically, owed largely to high house prices and weak wage growth since the financial crisis.
So, which cities are the best options for millennial tenants living in the private rental sector?
New research by credit expert TotallyMoney assessed 16 elements that are widely considered to be important to millennials, and used them to rank 63 cities in the UK, to reveal the best locations for millennial tenants.
These elements include: work factors, such as overtime hours, paid overtime, average weekly earnings, number of business start-ups, graduate hires, employment rates and the number of young people on benefits; property factors, such as the cost of a one-bedroom home to rent, as well as to buy; cost of living factors, such as the price of a cappuccino, gym membership and meal for two; and lifestyle factors, such as number of things to do, the population aged 0-17 and 18-29 and the percentage of Remain voters.
The study saw Scotland take two spots in the top three, led by Glasgow, owing to decent weekly wages, innumerable entertainment hotspots and house prices well below the national average – thought to be a huge contributor to its high performance.
Despite its reputation for extortionately high living costs and house prices, London still performs well, at second place. The capital isn’t shy of things for millennials to do, and also sees the highest weekly earnings, at an average of £727 per week, as well as the highest number of graduate hires across the whole of the UK.
In third place is Aberdeen. Its employment rates are the same as London’s and it has higher than average weekly earnings.
Top 10 cities for millennial tenants
Glasgow
London
Aberdeen
Liverpool
Bristol
Gloucester
Southampton
Cambridge
Cardiff
Middlesbrough
Basildon, Essex takes the bottom spot, owing to a paltry 2% of graduates finding work there, as well as extra curricular activities paling in comparison to the rest of the UK. It also had the second lowest Remain voters.
Yorkshire cities Doncaster (62nd), Wakefield (60th) and Huddersfield (59th) also performed badly. While one-bed home costs are low, so are wages, with graduate hires comprising just 6% across all three cities.
James McCaffrey, the Spokesperson for TotallyMoney, says: “There are some things millennials have had to adjust to that haven’t been experienced by past generations, and, with this, comes an entirely different set of priorities.
“Rising house prices, stagnant wages, and Brexit are just some of the hurdles this generation have to get over. But that’s where our map could help, as it makes it much easier for millennials to find the places where those hurdles might be easier to jump.”
He continues: “Of course, the rankings should be taken with a small pinch of salt, as some factors will be more important to some than others. Nevertheless, if there’s a particular area young people have on the brain, our map certainly makes it easier for them to consider elements they might not have thought about before.”
The Residential Landlords Association (RLA) is welcoming calls by a parliamentary committee for tax incentives for private landlords to make rental home improvements.
A House of Lords committee made the recommendation looking at the regeneration of seaside towns and communities.
Following evidence provided by the RLA, the committee’s report, published yesterday (4th April 2019), recommends: “The introduction of stronger incentives for private landlords to improve the quality and design of their properties… This might include tax relief for making improvements to properties.”
The RLA has long argued that the Government should use taxation more positively to support the vast majority of landlords who operate fairly and try to provide the best homes for their tenants. This has included the organisation’s call to make any work a landlord carries out that is recommended on an Energy Performance Certificate to improve the energy efficiency of rental homes tax deductible.
John Stewart, the Policy Manager of the RLA, says: “We welcome the recognition this report gives to supporting landlords to invest in raising the standard of housing for their tenants. We call on the Government to accept this proposal.”
Landlords, would you like to see the Government introduce tax relief for making rental home improvements?
This recommendation comes at an important time in the private rental sector, as landlords are now more accountable than ever for the conditions of their properties. Under the Homes (Fitness for Human Habitation) Act 2018, tenants can sue their landlords for unsafe rental housing.
