Buy-to-let may see a purple patch later this year as remortgaging increases

10th April 2013

The first quarter of 2013 saw a new high in buy-to-let remortgaging activity, with more landlords trying to raise enough capital to expand their portfolios and take advantage of high gross yields, according to research by Mortgages for Business, a specialist buy to let broker.

Remortgaging accounted for 69 per cent of all residential buy to let transactions in the first quarter – up from just 43 per cent in the last quarter of 2012 – and was the highest on record for a single quarter since the start of the broker’s Complex Buy to Let Index in the first quarter of 2011. Refinancing also accounted for over two-thirds of transactions on Houses in Multiple Occupation and Multi-unit Freehold Blocks.

High gross yields are encouraging more landlords to refinance. Average gross yields have increased over the past year on all property types other than Houses in Multiple Occupation, which has encouraged more landlords to refinance to free up enough capital to make further purchases. Yields on vanilla property have improved marginally from 6.3 per cent to 6.4 per cent over the past 12 months – although it remains by some distance the lowest gross yielding asset class. Yields on semi-commercial property are significantly higher, and, despite the fall in HMO gross yields from 10.7 per cent to 10.5 per cent over the past 12 months, it remains the highest yielding property type.

The broker says another factor supporting the increase may be the Funding for Lending Scheme, which has begun to improve mortgage availability by encouraging lenders to ease criteria and drop rates even further. Demand is also being driven by the RBS Group and Irish banks which are encourging landlords to refinance elsewhere.

David Whittaker, managing director of Mortgages for Business, says: “Gross yields are tantalisingly strong at the moment, and that has sparked a real splurge of refinancing as landlords try to unlock enough capital to expand their portfolios and make hay while yields are high. With so much refinancing going on at the moment, we might well see a purple patch of purchasing activity later on in 2013.”

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