The total average number of buy to let mortgage products currently on the market stands at 508 compared to 403 in the previous quarter. There was one new entrant to the lending market over the last three months taking the total number of BTL lenders to 23.
The rise in products and lenders is a result of the race to keep up with the demand from buy to let investors as property prices wane and rental demand grows. Despite growth in the number of owner occupier mortgages and loans suitable for first time buyers, demand for rental property continues to push rents higher and drives the growth of average yields.
Complex buy to let deals continue to provide the best yields for professional investors. However, new products introduced over the last quarter aimed at investors looking to purchase smaller Houses in Multiple Occupation (HMO) have caused yields for this type of property to fall slightly.
The average yield for HMOs is now 9.3%, down from 10% in the second quarter. These new products have also caused average LTVs for HMOs to rise to 66% from 60% and average loan sizes to fall from £321,836 in the second quarter to £292,969 now.
Multi-unit Freehold Block (MUFB) deals continue to provide good returns for investors with yields rising over the last three months. Despite smaller properties being bought in the third quarter, average loans are now £378,531 compared to £513,197 in the previous quarter, the average MUFB mortgage yield is now 6.9%, up from 6.6% last quarter due to the quality of the accommodation being high. Average LTVs for MUFB deals rose to 64% from 59% last quarter.
‘This is the third straight quarter in which the number of buy to let deals has risen in response to overwhelming demand from professional investors. However growth over the last three months slowed to 25% having risen 35% in the previous quarter suggesting a seasonal fluctuation during the summer,’ said David Whittaker, managing director at Mortgages for Business.
‘It will be interesting to see if the figure rises again at the end of the year. With the Base Rate set to remain low for the medium term, property prices falling and demand from tenants showing no signs of dropping, investors will continue to capitalise on the healthy returns available from the buy to let market,’ he added.
