Rising numbers of buy-to-let investors chase mortgages on cheaper properties

  • Seven in ten landlords search for a mortgage on properties valued below £250,000 
  • One in three (35 per cent) look for mortgages on potential properties costing less than £150,000
  • More landlords opt for higher loan-to-values (LTVs) as mortgage rates continue to fall 

Growing numbers of buy-to-let landlords are searching for mortgages on cheaper valued properties, according to the Mortgage Search Tracker from Mortgage Advice Bureau – the UK’s best-known mortgage broker brand*.

Data from over 250,000 monthly product searches via price comparison websites powered by Twenty7Tec – a leading supplier of mortgage search tools – shows seven in ten (70 per cent) 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 per cent in Q3 2014.  This is also the highest figure seen in two years (since Q3 2013 – 82 per cent).

A year ago, almost half (44 per cent) 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 per cent) 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 per cent in Q3 2014 to 35 per cent. An additional 35 per cent looked for a mortgage on properties between £150,000 and £249,999, a slight increase since Q3 2014 (32 per cent).

Rising numbers of buy-to-let landlords are looking for a mortgage on cheaper properties

Screen Shot 2015-11-23 at 11.35.40

This trend towards looking for cheaper investment properties comes as average UK house prices continue to rise, up by 5.2 per cent 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.”

Landlords search for 70-79.99 per cent LTV mortgages as rates continue to fall 

The most popular LTV for a buy-to-let mortgage in Q3 2015 was between 70 per cent and 79.99 per cent, with two in five (41 per cent) searching for this: the highest proportion recorded since Mortgage Advice Bureau began tracking this data in Q3 2013, up ten percentage points from 31 per cent 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 per cent fell from 27 per cent in Q3 2014 to 22 per cent, while those searching for a mortgage with an LTV between 60 per cent and 69.99 per cent dropped from 26 per cent to 23 per cent.

However, relatively few landlords are looking for LTVs above 80 per cent. The proportion of landlords looking for LTVs above 80 per cent has risen just one percentage point in the past year. This is reassuring given the Financial Policy Committee’s (FPC) concerns surrounding buy-to-let landlords with LTVs above 80 per cent, as evidenced in their July Statement.

Landlords show growing interest in 70-79.99 per cent LTV mortgages

unnamed

Brian Murphy, head of lending at Mortgage Advice Bureau, said: 

“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.”