Data from over 250,000 monthly product searches via price comparison websites powered by Twenty7Tec reveals that 70% of buy-to-let investors looking for a mortgage in Q3 2015 based their search on a property valued below £250,000; up by 17 percentage points from 53% in Q3 2014. This is also the highest figure seen since Q3 2013.
A year ago, almost half (44%) of landlords were searching for mortgages on properties priced between £250,000 and £499,999. This proportion has fallen sharply over the past 12 months, down to just a quarter (24%) in Q3 2015.
As fewer buy-to-let borrowers look to invest in higher priced properties, there has been a surge in searches for mortgages on properties worth less than £150,000 in Q3 2015: up from 21% in Q3 2014 to 35%. An additional 35% looked for a mortgage on properties between £150,000 and £249,999, a slight increase since Q3 2014 (32%).
This trend towards looking for cheaper investment properties comes as average UK house prices continue to rise, up by 5.2% in the past year.1 London, the South East, South West and East of England all have average prices of more than £250,000.
Brian Murphy, head of lending at Mortgage Advice Bureau, said:
“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 popular LTV for a buy-to-let mortgage in Q3 2015 was between 70% and 79.99%, with two in five (41%) searching for this: the highest proportion recorded since Mortgage Advice Bureau began tracking this data in Q3 2013, up ten percentage points from 31% to Q3 2014.
At the same time, searches for lower LTV products fell in popularity over the past 12 months. The proportion of landlords looking for LTVs below 60% fell from 27% in Q3 2014 to 22%, while those searching for a mortgage with an LTV between 60% and 69.99% dropped from 26% to 23%.
However, relatively few landlords are looking for LTVs above 80%. The proportion of landlords looking for LTVs above 80% has risen just one percentage point in the past year. This is reassuring given the Financial Policy Committee’s concerns surrounding buy-to-let landlords with LTVs above 80%, as evidenced in their July Statement.
Brian Murphy added:
“Mortgage rates have plummeted throughout 2015, with buy-to-let investors benefiting 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.”
