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Two-thirds of buy-to-let deals are remortgages

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Two-in-three buy-to-let transactions are remortgages on existing properties, new figures have shown.

The index by Mortgages for Business showed 66% of deals were for remortgage compared to 34% for new purchases.

The level of remortgage business is four percentage points higher than at the end of last year.

Rental yields on standard buy-to-let properties were 6.4% in the first quarter of 2015. For houses of multiple occupations (HMOs) this yield was 10.4%.

As more landlords look to take advantage of low rates and remortgage average loan-to-values have risen, the report added. For standard buy-to-let loans the average LTV rose from 63% to 66% in the first half of the year.

Landlords of HMOs have seen loan to value ratios grow to 70% from an average of 64% LTV in the final quarter of last year.

David Whittaker managing director of Mortgages for Business, said more landlords were looking to refinance.

“Record low mortgage rates are driving wave upon wave of landlords to reassess their finances,” he said.

“A great deal agreed last year may be uncompetitive by today’s standards. So this stampede is completely rational – it represents a charge by landlords to make the most of an unprecedented economic situation.

“Remortgaging is often done for the purposes of raising extra capital, and this is clearly reflected in higher loan to value ratios. However, this is by no means an unwelcome trend – and could in turn open the door to more new purchases and investment by landlords.

“Rental yields are healthy and there is a gathering demand from an increasingly prosperous base of tenants. So the fundamentals of the rental market – and of landlords’ finances – are still extremely solid.”

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