Landlords are looking to expand their property portfolios at an accelerating pace over the rest of 2015, according to the latest property investor survey from specialist buy to let mortgage broker Mortgages for Business.
As of April, 65% of UK landlords plan to buy at least one further property in the next six months. This compares to only 55% looking to buy as recently as November 2014.
Just 8% of landlords currently plan to sell any property, while 27% do not intend to either grow or reduce the size of their property portfolio over the next six months.
David Whittaker, managing director at Mortgages for Business, comments:
“Landlords are better capitalised and now more confident about reinvesting. A strong rental market is being driven by tenants moving to make the most of job opportunities, and now gradually starting to earn more too. That new surge of demand is putting more upwards pressure on rents, and landlords are only just beginning to supply more homes to let in response.
“On top of this, after the surprise stability of a majority government, landlords will almost certainly see a short-term boost of house price growth – while the threat of damaging regulation has been lifted for at least the next five years.”
When choosing how to finance borrowing, landlords are also changing their approach. More than a quarter (26%) would currently prefer a variable rate deal for a new buy to let mortgage, up from 23% in November 2014.
However, choosing to fix repayments for just a short time period is actually slightly less popular than six months ago. Currently 22% prefer a two year fixed rate mortgage, down marginally from 23% in November, while 12% would go for a three year fix, down from 15% in November. Approaching a third of landlords (30%) would still choose the safety of fixing their mortgage repayments for five years, though this is also slightly down on 31% in November.
By contrast, very long term fixes appear to be gaining popularity. One-in-ten landlords (10%) would now choose a 10-year fix, more than the 8% recorded in November.
Landlords’ average loan-to-value ratios have fallen in the space of the last six months. Overall, the average overall LTV ratio for UK landlords now stands at 54%, down from 57% in November.
The proportion of landlords with overall borrowing above 75% LTV has fallen to just 12%, down from 16% in November. The vast majority have some borrowing, though below 75% LTV. This now represents more than four in five landlords (81%), up from 79% in the previous survey. Currently only 6% of UK landlords have no borrowing whatsoever.
David Whittaker explains:
“Over the medium term, interest rate expectations have never been friendlier to landlords. This is clearly reflected in the proportion willing to eschew guaranteed stability in favour of some immediate savings. Over a two year period this may be rational, and landlords as a whole don’t tend to take extraordinary risks with their financial position.
“However, over the longer-term, the stability of a fixed rate is likely to pay off, and given how five year fixes are barely more expensive than some variable rates we maintain our existing advice to fix now if it fits with a landlords’ investment plans over the next five to ten years.”
