The report also highlights that buy-to-let repossessions have stabilised which, as with the residential market, we suspect is more down to lower servicing costs by virtue of a historically low base rate than any seismic improvement in market fundamentals. The speculative investor has largely left the party and it is the well financed, well researched long term landlords that predominantly remain.
It is true that the availability of mortgage finance for the buy-to-letter has improved significantly over the last 12 months, loan-to-value (LTV) criteria has shifted from 65% max through to 75% with a handful of lenders now offering 80% LTV products albeit the pricing remains expensive by historical standards.
SPFs own research tells us that tenant demand is strong and yields are hardening so should the professional landlord now be looking to add stock to their portfolio or continue to use surplus rental income to pay down borrowing? Our view is that, for the seasoned investor, both are true.
With buy-to-let reversionary rates typically 2 percent above base rate, swathes of our clients are enjoying ‘pay rates’ on a par with the most competitive residential products for new borrowers. While servicing costs remain low it makes sense to use your surplus rental income to reduce your mortgage liability.
On the other hand, with the house price indices going into reverse there could be some very attractive opportunities to add stock to your portfolio. There is mortgage product innovation emerging too, for example, there are ways to release equity from your portfolio to help fund new purchases without losing the benefit of the attractive reversionary terms from your existing lender.
It certainly is an interesting time for the experienced landlord and there are opportunities for those that wish to be active, however, assessing your investment goals and appetite for risk are more crucial than ever and we would always recommend you seek professional advice in this regard.