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Capital Appreciation Up, Rental Yields Down

July 7, 2014 | Landlord News  

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The latest Complex But-to-Let Index by Mortgages for Business has shown a slight drop in rental yields. Gross yields on vanilla buy-to-let properties fell from 6.4% in Q1 to 6.3% in the second quarter, as rental rises fail to match the pace of fast-growing property values.

Although gross yields on more complex buy-to-let properties also fell, they still command considerably higher yields. Gross yields on houses in multiple occupation (HMOs) fell from 9.6% in Q1 to 9.3% in Q2. Multi-unit freehold blocks now command gross yields a full percentage point higher than standard buy-to-let investments, at 7.3%.

Remortgaging of standard buy-to-let properties hit a record high in Q2, representing 70% of new vanilla buy-to-let mortgages, an increase of 5% from Q1. As far as new purchases go, landlords are diversifying their portfolios by targetting more complex properties. In Q2, 31% of mortgages for multi-units were for new purchases, up from 19%. The same is true for HMOs, up to 28% from 25%.

The number of buy-to-let mortgage options now available to landlords has hit a record high of 637, representing a growth of 8.7% from the previous quarter, and an annual growth of 37%.

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