There was a new high in remortgaging activity in the first quarter of 2013, according to research from Mortgages For Business. It shows that increasing numbers of landlords are trying to raise enough capital to expand their portfolios, taking advantage of high gross yields.
In the first three months of 2013, remortgaging accounted for 69% of all residential buy-to-let transactions, an increase of 26% from the final quarter of 2012. This makes it the highest on record for a single quarter since Mortgages For Business started their Complex Buy-To-Let Index in the first quarter of 2011. Refinancing also accounted for more than two-thirds of transactions on Houses in Multiple Occupation (HMO) and Multi-unit Freehold Blocks (MUFB).
Over the past 12 months, gross yields have increased on all property types other than HMO. This has prompted more landlords to refinance to access more capital in order to make further purchases. Semi-commercial property remains the highest yielding property type, despite a fall in HMO gross yields from 10.7% to 10.5% over the last 12 months. Although yields on vanilla property have marginally increased from 6.3% to 6.4% over the last year, it remains the lowest yielding asset class by quite some distance.
The Funding For Lending scheme may also be a factor supporting the recorded increase, improving mortgage availability by encouraging lenders to ease criteria and drops rates further. The ongoing demands from RBS Group and Irish banks for landlords to refinance elsewhere are also partly responsible for this surge in remortgaging.
David Whittaker, managing director of Mortgages for Business, said, “Gross yields are tantalisingly strong at the moment, and that has sparked a real splurge of refinancing as landlords try to unlock enough capital to expand their portfolios and make hay while yields are high. With so much refinancing going on at the moment, we might well see a purple patch of purchasing activity later on in 2013.”
Over the course of the year, average property values for buy-to-let transactions increased on residential stock and MUFB. This is mostly attributed to the wider rise in house prices, but also as a result of investors purchasing properties in more expensive areas. The average property values on residential property transactions are over a third higher than last year.
The number of mortgages on the market has fallen for the second quarter in a row, from 444 down to 434. Lenders are following a trend of cutting out the least popular mortgages from their range and placing more focus on the most popular.
Mr Whittaker said, “The range of mortgages shrunk over the last quarter but that’s more because lenders are being selective and weeding out less popular products, rather than a sign that it is becoming harder for property investors to get a mortgage.”