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Rental property insurance: BTL to grow?

October 13th, 2011

Rental property insurance holders up and down the country might be interested to hear about the latest news on buy-to-let mortgaging in the UK, this week.

The total number of buy-to-let mortgages on the market has risen for the third quarter in a row, according to the latest Complex BTL Index.

The data, provided by broker Mortgages For Business, finds the products are now 26 per cent more numerous than in quarter two.

The total average number of buy-to-let mortgage products currently on the market stands at 508 compared to 403 in the previous quarter.

Such a rise in products and lenders is a result of the race to keep up with the demand from buy to let insurance holders looking to invest.

And this trend is a result of property prices waning and the fact that rental demand continues to grow.

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.

Average yields from ‘vanilla’ BTL mortgages rose to 6.3 per cent in quarter three up from 5.8 per cent in quarter two.

Complex BTL 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 per cent – down from 10 per cent in quarter two.

These new products have also caused average LTVs for HMOs to rise to 66 per cent from 60 per cent and average loan sizes to fall from £321,836 in quarter two to £292,969 now.

David Whittaker, managing director at Mortgages for Business, commented:
“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 per cent having risen 35 per cent in the previous quarter suggesting a seasonal fluctuation during the summer.

“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.”

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