LTVs increasing in the buy-to-let sector
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TBMC’s Landlord Profile Tracking Index shows in Q3 2010 there was an increase in both loan size and LTV for mortgage offers obtained during the period.
It also found a narrowing price gap between fixed rates and trackers, meaning that fixed rates are proving popular amongst landlords.
Andy Young, chief executive at TBMC, says it is encouraging to see a steady increase in loan size over the last three quarters with the average buy-to-let mortgage now over 30% higher than it was during the final two quarters of 2010.
He says this reflects the gradual recovery of property prices and the availability of some higher LTV buy-to-let products in the mortgage market.
The average LTV is also creeping up slowly and was 66.13% in quarter three compared with 64.23% during quarter one.
Young says: “Over the last year we have seen a steady lowering in the price of the average fixed rate buy-to-let mortgage being offered. For mortgages offered in quarter three this year via
“TBMC, the average fixed rate was 4.71% compared with 5.24% in the final quarter of 2009. However, tracker rates have started to increase since the beginning of the year, 4.15% in Q1 2010 and the average tracker rate offered in quarter three this year was 4.45%.
“As the pricing of trackers and fixed rates have converged we have, unsuprisingly, seen a rise in popularity of fixed rates and in the third quarter there were more fixed rate mortgages offered - 55% via TBMC than there were trackers - 45%.”
For the fourth quarter in succession there has been an increase in the percentage of applications received for remortgages compared to purchases, with an almost even split in quarter three this year.
Young adds: “Some 48% of applications were for remortgages compared with 52% for purchases. This may reflect increasing competition in the market as new lenders have entered the market and established lenders like Paragon have re-emerged, resulting in more attractive buy-to-let products for existing landlords.”
“The buy-to-let mortgage market has stabilised and there are some positive signs appearing with increasing competition in the market. However, the level of finance available to landlords is still very low, at just around £8 billion of new loans expected in 2010, so there is still a way to go the before the market recovers to a normal level and to the extent that supply meets demand.”
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