An increasing number of buy-to-let landlords are looking for mortgages on cheaper valued properties, according to the Mortgage Advice Bureau.
Data from the latest Mortgage Search Tracker has revealed that in the three months to the end of September, seven in ten (70%) buy-to-let investors were looking for a mortgage on a property below £250,000, compared to 53% a year ago.
Last year, almost half (44%) of landlords were searching for mortgages on properties priced between £250,000 and £499,999. This proportion has fallen sharply over the past 12 months to one in four (24%).
With fewer buy-to-let borrowers looking to invest in higher priced properties, there has been a surge in searches for mortgages on homes below £150,000 over the past year.
One in three (35%) buy-to-let borrowers is searching for a mortgage on potential properties costing less than £150,000, up from one in five (21%) in the last 12 months.
The demand for cheaper property comes as house prices continue to rise.
According to the latest figures from the Office for National Statistics, UK house prices increased by 6.1% in the year to September. This means the average annual house price is now £286,000, up from £273,000 last year.
Brian Murphy, head of lending at the Mortgage Advice Bureau, said: “In recent months we have seen a surge of buy-to-let landlords looking for mortgages on lower-priced properties. As rental demand remains strong nationwide, opting for a cheaper property can result in more attractive yields. It appears many landlords are looking to invest in areas outside the South of England, where property prices won’t hold them back from making a profit.”
As mortgage rates continue to fall, more landlords are opting for higher loan-to-values (LTVs).
In the three months to October, the most popular LTV for a buy-to-let mortgage was between 70% and 79.99%, with two in five (41%) searching for this.
Searches for lower LTV products have fallen in popularity over the past 12 months, with the number of landlords looking for LTVs below 60% down to 22% from 27% last year. At the same time, those searching for a mortgage with an LTV between 60% and 69.99% fell from 26% to 23%.
“Mortgage rates have plummeted throughout 2015, with buy-to-let investors benefiting from competitive pricing as well as residential buyers. Although higher LTVs generally mean more costly monthly repayments, falling rates mean landlords may find they can now afford higher LTV products,” Murphy said.
