More UK landlords remortgaging to raise capital
It has been claimed that many UK landlords are making the decision to remortgage their properties in order to raise capital for further investment in the private rental sector. Mortgages for Business have conducted thorough research that shows Houses in Multiple Occupation (HMO) are the primary source of refinancing by landlords seeing a rise from 55% in 2011 to 80% in 2012. Another major source of refinancing are Multi-Unit Freehold Blocks (MUFB) which have also increased from 76% to 78% in 2012.
These landlords have refinanced their HMOs at the lower value scale, thus reducing the typical loan amount on Houses in Multiple Occupation since last year. Buy to let properties are gaining popularity due to the fact that the property market is so hard to enter for first time buyers. Tenant demand is high whilst property prices are steady so more landlords are taking advantage of this unique situation. Remortgaging puts these investors into a great position in the property market.
RBS and Irish lenders are asking landlords to remortgage elsewhere so that property exposure can be reduced. Although there is high demand and lowered property prices, these lenders plus many more are denying remortgages. Vanilla Buy to Let experienced a fall in gross income from 6.7% to 6.4% but during the last year they have increased from 6.1% back up to 6.4%. This has encouraged more landlords into investing and adding more properties to their portfolios. Complex property also experienced a decline in gross yields during 2012, but compared to a year ago they have actually increased. Gross yields on Multi-Unit Freehold Blocks fell from 8.8% to 8% and Houses in Multiple Occupation yields fell from 11.1% to 10.9%. On average, Houses in Multiple Occupation gross yields have actually increased from 9.9% and Multi-Unit Freehold Blocks from 7.1% in comparison to a year ago.
Commercial Property Finance
The obvious decline in gross yields across many different houses did not affect semi-commercial properties as these rose from 7.1% to 8% which showed the obvious demand for this type of property. During the fourth quarter of 2012, the number of buy to let lenders increased from 25 to 26 with the introduction of InterBay Commercial. However, the amount of mortgage products decreased by 5% overall as products were withdrawn from the market. Even though fresh product launches are said to occur this year, the average number of products actually on the market has decreased.
It is normal for lenders to withdraw mortgage products during the run up to Christmas as many new changes will be released in the New Year, so it is expected than new mortgage products will be launched during 2013. Funding for Lending is anticipated to take action during 2013 and the availability of buy to let mortgages should rise. It has been said by many landlords that lenders aren’t doing enough to help with potential investments so this year should see many landlords being able to remortgage and add more properties to their investment portfolios.