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New research finds buy-to-let landlords remain active in the market

Buy-to-let landlords are one of the drivers behind activity in the mortgage market at the moment, although demand for interest-only mortgages is climbing.

The overall mortgage market in the UK remains “robust”, according to the latest research from Legal & General which analysed searches on its Ignite platform. It also found that buy-to-let landlords are a key buyer type driving the market.

In the face of the current climate and affordability issues, much of which is linked to rising mortgage rates over the past few months, it seems there is still a healthy appetite among buy-to-let landlords and homeowners to secure borrowing.

The data found that searches for ‘rental income’ on its site increased by 38% in June, while ‘top slicing’ – which is a solution sometimes sought by landlords whose rental income doesn’t sufficiently cover their mortgage payments – saw a 49% increase in searches.

Multi-let unit freehold blocks also saw their popularity surge among buy-to-let landlords, according to the research, which recorded a 32% rise in this search term.

More buy-to-let landlords choosing interest-only?

Interest-only mortgages have long since been a popular option among buy-to-let landlords, although homeowners may also be able to take out this mortgage type. It essentially means that your monthly payments are only paying off the interest of what you’ve borrowed, rather than the loan itself.

Lenders normally require borrowers to have a minimum higher income amount and deposit, as well as to provide proof that they will be able to pay off the mortgage in full when the term ends. This cannot normally be solely through the sale of the home when it is a main residence, in case it loses value.

For buy-to-let landlords, though, because it is an investment property and not a primary residence, it can be sold at the end of the mortgage term to pay off the loan. Interest-only is a popular option because it reduces your monthly payments.

Legal & General’s research found that there was a 53% increase in people searching for interest-only mortgages in June. This demonstrates that people are increasingly looking for ways to bring down their monthly outgoings as rates remain high.

Overseas buyers in the market

Growth in the housing market continues to be bolstered by overseas investors, according to the research, with a 16% increase in searches from overseas customers in June.

The UK property market has long since been a popular place for buyers living overseas, including those who want to operate as buy-to-let landlords in the country’s strong rental market, with tenants demand surging over recent years.

While London remains one of the most traditional hotspots for investors from abroad, other parts of the UK like Manchester, Birmingham and Sheffield have proven increasingly popular. These cities have particularly competitive property markets, with world-class universities, thriving jobs markets and high rental demand.

Legal & General also found that customers with a permanent right to reside or indefinite leave to remain had increased on its site by 38% in June.

Advisers play a crucial role

Jodie White, Head of Mortgage Products & Transformation, Legal & General Technology, said: “It’s clear that the mortgage market remains robust despite ongoing affordability issues, rising interest rates and stubborn inflation.

“It’s positive to see that market activity is still being driven by specific sectors including buy-to-let, overseas buyers, and increased demand for particular property types.

“During this time, it’s vitally important that advisers implement new technologies to best manage demand for mortgage advice across various sectors. Advice is incredibly important right now and advisers have a crucial role to play in supporting buyers and ensuring they have access to the full range of options available to them.”

At BuyAssociation, we have been connecting investors with top-class developers and property investment opportunities in the UK since 2005. Browse some of our projects here, or get in touch for more information.

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