The buy-to-let market looks set to expand further during 2014, with 60% of survey respondents planning to increase their property portfolios over the next six months, according to research released this morning by specialist mortgage broker Mortgages for Business which also found that 95% of landlords have borrowing on their current portfolio.
The research, which polled 251 property investors, suggested landlord appetite for more purchases stems from the attractive yields available across a variety of investment property types. Results suggest that investors are looking into having portfolios with more diversity, with a rise in those planning to purchase houses in multiple occupation (29%), multi-unit freehold blocks (19%), semi-commercial property (15%) and commercial property (15%). As might be expected 82% of survey respondents were also considering purchasing at least one vanilla buy to let property.
Whilst it is not known which survey respondents have already refinanced in the last year, 45% of landlords said they were looking to remortgage in the next three to six months.
Commenting on the findings, David Whittaker, managing director at Mortgages for Business, said: “With buy to let mortgage rates at historic lows, this strategy may well prove prudent in protecting them against future interest rate rises. Of those who are not looking to remortgage, we must surmise that some will be keen to hang onto their existing reversion rates for as long as possible. It will be interesting to see whether the situation changes as the year goes on. Accordingly the next survey will include a question about recent remortgaging activity.”
Only 3% of landlords say they are planning to trim their portfolios over the next six months, down from 6% six months ago.
When asked about initial mortgage rate periods, five year fixed rate products came out as the favoured choice amongst property investors, with 34% of the votes. This reflects current advice from Mortgages for Business that investors should consider five year fixed rates as part of their portfolio finance strategy.
The results also produced some encouraging news for lenders with fewer respondents (58% down from 68% in October 2013) believing that lenders could be doing more to support the property investors, even with the backdrop of the MMR. One suggested reason for this improved positivity comes from the increase in product availability and competitive pricing. This is good news considering 60% of landlords intend to expand their portfolios over the next six months and 47% of these will need to refinance in order to do so.
Of course there were still suggestions for improvements with the biggest issue being lending criteria. Nearly half (47%) made comment that they would like easier lending criteria, including relaxing age restrictions and removing non-property related income requirements.
The research also found, perhaps surprisingly, that 41% of respondents indicated earning less than £25,000 a year in addition to rent. This is despite most buy to lenders stipulating landlords must have an additional annual income of around £25,000 in order to get finance.
David Whittaker commented: “The survey was sent out to our clients, many of whom are considered professional landlords by lenders because they typically have larger portfolios. Whilst this often means their choice of lender is narrowed, those lenders who do accept professional landlords usually do not impose a minimum income threshold and are happy to accept income from rent.”