Buy-to-let product numbers grew more slowly in the second quarter, compared with the first, following the rush to complete before the second homes stamp duty increased in April.
Mortgages for Business’ latest buy-to-let index showed the number of products available in the second quarter increased by an average of just 75 in the second quarter, compared to an increase of 142 in the first quarter.
It also attributed much of the early year increase to lenders creating separate offerings with differing stress test calculations for personal and limited company borrowers.
The average loan-to-value of houses in multiple occupation (HMOs) increased from just 62 per cent in the first quarter to 75 per cent in the second quarter.
However, looking at the data over the last five years, loan-to-values on HMOs have remained fairly steady, averaging 69 per cent.
LTVs on “vanilla” buy-to-let property - normal two or three bed houses and flats where borrowers and properties fit the general lending criteria for off-the-shelf products - have also remained steady, averaging 67 per cent since the index began in 2011.
David Whittaker, managing director of Mortgages for Business, noted both vanilla buy-to-let and HMO property offer fairly consistent yields.
He said: “For the more cautious investor, and for those who like a mix of risk within their portfolio, 6.1 per cent average yield on a standard buy-to-let still represents a good return.
“And for the more experienced investor, HMOs certainly perform better than all other types of rental property, averaging just below 10 per cent since 2011.”
Average yields on multi-units grew to 9.5 per cent, well above the five year average of 7.4 per cent.
Semi-commercial property performed less well than expected, considering these buildings are not subject to the residential stamp duty surcharge, added the report.
peter.walker@ft.com
