The average fixed rate for offers processed by The Business Mortgage Company in Q2 rose more noticeably to 5.06% up from 4.82% in Q1 (the highest since the beginning of 2010).
This may reflect the wider availability of higher loan-to-value fixed rates which tend to be priced higher.
The split between fixed and variable rates reflects the pricing gap and there is now a clear preference for variable products.
At TBMC during the second quarter this year 56% of applications were for variable rates and 44% for fixed rates.
There are currently some very competitive 2-year discounted rates available and landlords are feeling confident that the underlying interest rate will remain low for some time to come.
Andy Young, chief executive of TBMC, said: “For the past couple of years rental prices have experienced a general upward trend as tenant demand and competition for accommodation has increased.
“This has been due to a number of factors including first time buyers struggling to get on the housing ladder, a limited property stock, large student populations and a more mobile work force.”
In Q2 2012 average rental income was still strong averaging over £1,000 per month and landlords can expect to continue experiencing high demand and good returns.
Since the beginning of the year there has been a gradual increase in the average loan to value for buy-to-let mortgages processed by TBMC.
At the end of the 2011 the average LTV for mortgage offers was 63.41%, the lowest it had been for two years as the choice of higher LTV products for landlords was limited.
The past six months has seen a significant improvement in the number of lenders and products available at up to 80% LTV and there are even some 85% LTV products currently on offer.
Young said: “This is great news for landlords especially professionals who may prefer a more highly geared portfolio which can potentially allow them to release funds to buy more properties and increase their overall returns.”
In Q2 2102 the average LTV for mortgage offers at TBMC was 67.30% which is the highest it has been for two years.
Meanwhile average rental yields were consistently over 6.0%. In Q2 2012 those applying for a buy-to-let mortgage via TBMC reported an average rental yield of 6.60% which is up on the previous quarter (6.29%).
Young added: “As to be expected London was the most popular location for rental property in Q2 but the capital recorded a below average rental yield of 5.62%.
“The second most popular locations were Newcastle upon Tyne and Birmingham, both recording an above average rental yield of 7.80% and 7.22% respectively which goes to show how choice of location can affect overall returns.”
