Growing Number of Landlords Investing in Cheaper Properties

An increasing number of buy-to-let landlords are seeking to invest in cheaper properties, found the Mortgage Search Tracker from the Mortgage Advice Bureau (MAB).

Data from more than 250,000 monthly product searches on price comparison websites reveals that 70% of buy-to-let landlords looking for a mortgage in the third quarter (Q3) of 2015 based their search on a home valued at under £250,000, a 17% increase on the 53% recorded in Q3 2014. It is also the highest figure seen since Q3 2013.

Growing Number of Landlords Investing in Cheaper Properties

Growing Number of Landlords Investing in Cheaper Properties

12 months ago, around half of landlords (44%) were searching for mortgages on properties valued between £250,000 and £499,999. This proportion has dropped significantly over the year, down to only a quarter (24%) in Q3 2015.

As fewer investors look to buy expensive properties, there has been a surge in searches for mortgages on homes worth under £150,000, up from 21% last year to 35%. A further 35% looked for a mortgage on properties worth between £150,000 and £249,999, a 3% increase on Q3 2014.

This trend arrives as the average UK house price continues to rise, up by 5.2% over the last 12 months. The typical values of properties in London, the South East, South West and East of England are all over £250,000.

Head of Lending at the MAB, Brian Murphy, reports: “In recent months, we have seen a surge of buy-to-let landlords looking for mortgages on lower priced properties. As rental demand remains strong nationwide, opting for a cheaper property can result in more attractive yields. It appears many landlords are looking to invest in areas outside the south of England, where property prices won’t hold them back from making a profit.”

The most common loan-to-value (LTV) ratio on a buy-to-let mortgage in Q3 2015 was between 70% and 79.99%, with two in five (41%) investors searching for this; the highest proportion recorded since the MAB began tracking the data in Q3 2013, and up 31% on Q3 2014.

Meanwhile, searches at lower LTV products decreased. The amount of landlords looking for LTVs below 60% dropped from 27% in Q3 2014 to 22% in the same quarter of 2015. Those searching for an LTV between 60% and 69.99% declined from 26% to 23%.

However, few landlords are searching for LTVs over 80%. The proportion of investors looking for these mortgages has increased by just 1% in the last 12 months. This arrives as the Financial Policy Committee voiced its concerns over buy-to-let landlords with LTVs above 80%.

Murphy adds: “Mortgage rates have plummeted throughout 2015, with buy-to-let investors benefitting from competitive pricing as well as residential buyers. Although higher LTVs generally mean more costly monthly repayments, falling rates mean landlords may find they can now afford higher LTV products.”1

Have you been searching for cheaper properties lately?


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