Landlords are having to spend more to purchase rental properties, show figures from The Mortgage Broker Ltd, which found that average buy-to-let loans and deposits increased in 2016.
The nationwide broker believes that higher house prices and tougher lending criteria from banks are making it more expensive for buy-to-let landlords to purchase rental properties.
The data found that landlords borrowed an average of £15,000 more to purchase rental properties in 2016 compared with the previous year, with the typical loan increasing from £170,268 to £185,188.
However, the average loan-to-value ratio (LTV) dropped last year, from 61.6% in 2015 to 59.7% in 2016.
Meanwhile, the average deposit rose by 18.5% over the same period, from £105,605 to £125,016.
With the average house price rising from £275,286 in 2015 to £310,265 in 2016, landlords paid around 12.7% more to purchase rental properties over the past 12 months.
Recent figures from the Council of Mortgage Lenders show that gross buy-to-let lending in November – for which the latest data is available – was the highest monthly level recorded since the Stamp Duty changes introduced last April. Nevertheless, the trade body claimed that the increase was driven by a high number of remortgages.
The Managing Director of The Mortgage Broker Ltd, Darren Pescod, comments: “Landlords are certainly feeling the pinch, but the raft of tax changes that came into force in 2016 do not appear to have dampened the buy-to-let market. In many towns and cities, landlords have increased their investment in buy-to-let property, despite the financial challenges that have been recently thrown at them by the Government.
“Our research shows that landlords are finding larger deposits and increasing their borrowing to secure property. With mortgage interest rates so low and the demand for rental property booming, the market still provides a great investment opportunity.”
He continues: “Though the Stamp Duty additional levy and Income Tax changes that come into force in this tax year have slowed down this sector, in terms of the number of applicants applying for new buy-to-let mortgages. This may lead to some consolidation with larger landlords scooping up rental opportunities in their local area and beyond. Our view is that smaller landlords with fewer than three properties may find it financially tough and will pull out of the market.”
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