Paragon say this suggests the buy-to-let market is beginning to mature after a period of strong growth.
The proportion of landlords expanding their portfolios rose this quarter from 39% to 41%, while the number of people buying their first investment property declined from 27% to 24%.
Remortgages arranged by brokers and mortgage advisers have increased slightly, from 28% of the total last quarter to 29% this quarter.
The long-term trend of landlords expanding their portfolios has been generally upward over the past two years or so, rising from 37% in April 2002 to 41% now, while people purchasing their first investment property have dwindled from almost 39% in April 2002 to 24% now.
Paragon Mortgages’ managing director John Heron comments: “The typical landlord is becoming more experienced and is likely to be adding to his buy-to-let portfolio rather than buying his first investment property. This growing level of landlord expertise is welcome from the lender’s point of view as it makes buy-to-let business safer and more sustainable, particularly as a landlord will only buy an additional property if he is having a satisfactory experience with his existing portfolio.”
In the mortgage market as a whole, brokers continue to report growth in borrowers’ preferences for fixed rate products. Over the first quarter of 2005 the percentage of borrowers selecting fixed rate mortgages rose from 32% to 36%. Over the same period discount rate mortgages fell from 29% to 25% of mortgages arranged. This quarter, base rate trackers remained steady at 37%.
John Heron comments: “In a pre-election environment where further interest rate increases are expected –a growing preference for fixed rate deals is not surprising as borrowers want to lock in their borrowing costs.”
Intermediaries reported a further decline in the number of general mortgages arranged, down to 25.4 per office this quarter from 27.8 per office recorded in the fourth quarter of 2004. Business volumes are down 3% on the same period in 2003.
Figures for this quarter reveal that well over half (54%) of all mortgages handled by financial advisers were remortgages. This figure is down from 56% the previous quarter. The number of next-time buyers increased slightly this quarter to 26%, whilst 12% of mortgages were for the purchase of buy-to-let properties. This represents a rise from 10% to 12%. The number of mortgages for first-time buyers continued to decrease and now stands at 7.8%. It would seem that the trend over the past four years has been for remortgages and buy-to-let cases to increase whilst the proportion of first-time and next-time buyers has decreased.
John Heron comments: “Remortgaging remains by far the most important reason for arranging a loan, but a large proportion of borrowers – almost four in ten – do so to reduce outgoings. Those who do remortgage in order to fund expenditure are now more likely to put the money into a long-term property investment rather than using it for short-term consumer spending: 25% spend it on home improvements and 17% on a second property. This quarter has seen an increase in the number of borrowers remortgaging to purchase a second property, reflecting the fact that landlords are taking advantage of a weaker housing market in order to buy properties at lower prices.”
Despite the tail off in mortgage volumes, brokers remain optimistic and have increased their expectations for business growth next quarter, predicting on average 6.5% more mortgages in the second quarter of the year. This compares with an expected quarter-on-quarter increase of 0.9% last quarter.
