Life after stamp duty holiday – what now for buy-to-let?
From July 1st, 2021, the zero-rate stamp duty threshold was reduced from £500,000 to £250,000 then on 1st October it will revert to only £125,000, so there is little time for those purchasing properties to make some savings. Although buy-to-let property investors pay a 3% surcharge, the stamp duty holiday has created a boost in rental property purchases over the last 18 months during the Covid-19 pandemic.
Despite the stamp duty incentive coming to an end, there are still strong drivers for landlords to maintain their portfolios plus, look for opportunities to make additional property purchases. Average rental yields across England and Wales remain strong and recent data published by Fleet Mortgages supports this.
According to the data, landlords benefited from an average rental yield of 5.6% in the 2nd quarter of 2021 with some interesting regional variations. Year on year, Yorkshire & Humberside had the biggest increase rental yield rising from 6.1 to 7.2%.
Although London has suffered during the pandemic with falling rents, it is likely to recover well once the capital city opens more fully following the enduring Covid-19 lockdown measures.
For all professional landlords seeking to remortgage, release equity or expand their portfolios, buy-to-let lenders in the marketplace continue to demonstrate their appetite to lend. Increased competition means that buy-to-let mortgages are keenly priced and there are now more options available at higher loan-to-values (L2V), particularly in the 80% L2V bracket.
This bodes well for buy-to-let brokers who are looking to write more business with their landlord clients as there is a good choice of products for most scenarios. The complex buy-to-let mortgage market is also flourishing, together with the specialist lenders are perhaps being used more than ever before, especially for cases that don’t fit with High Street mainstream providers.
It also appears that complex buy-to-let lenders are in favour with the intermediary community according to recent research by Smart Money People. The research involved some 597 brokers who were asked to rate 44 different mortgage lenders from across the whole industry.
The complex buy-to-let lenders included in the research were rated highest by brokers for flexibility with a score of 96%, followed by mainstream Buy-to-Let lenders with a score of 87%. This underlines that within the Buy-to-Let mortgage sector, brokers value being able to deal with lenders that have a flexible approach to underwriting especially for more complicated cases.
However, the complex buy-to-let lenders only scored 67% for their ease of use compare with 80% for mainstream lenders. This is perhaps unsurprising as complex cases normally involve more thorough underwriting practices and have greater supporting evidence requirements.
Buy-to-let intermediaries can take confidence from a recent report from Hodge which showed that nearly three quarters (73%) of portfolio landlords use a mortgage broker to arrange finance for their buy-to-let properties. Furthermore, 71% of large portfolio landlords (£2m- £50m portfolio value) said that using a mortgage broker had saved them money.
This clearly highlights the value placed on buy-to-let mortgage brokers and an appreciation for the service they provide to their landlord clients. We look forward to hearing from you with your enquires.