UK landlords are experiencing bumper yields on their properties as the market becomes flooded with buy-to-let loan products.
According to Mortgages for Business’ Complex Buy-to-Let Index, gross yields on buy-to-let properties which only have a single tenancy agreement, stands at 5.9 per cent as of third quarter 2014.
However, this is a slight fall from 6.3 per cent in the second quarter this year.
Yet larger multi-unit blocks such as student houses, which have locks on bedroom doors and as well as multiple tenancy agreements, saw yields reach 8.6 per cent in the third quarter this year, up from 7.3 per cent in the previous period.
David Whittaker, managing director of Mortgages for Business, told International Business Times: “Rents on the plainest buy-to-let properties have not kept pace with rapid price rises in many areas, suppressing average yields.”
“This illustrates two key points for landlords – location matters – and the simplest investments are not always the most lucrative.
“Landlords with multiple tenants at each property can earn a better yield by providing what people need – often just a room rather than a whole flat.
“This must be done responsibly, for example HMOs often require a licence from the appropriate Local Authority, while landlords will also need a specialist mortgage product for more complex property types.”
Mortgage for Business also revealed that the number of buy-to-let mortgage products available is now at a fresh all-time record.
At the end of the third quarter of 2014, the number of available buy-to-let mortgages on the market stands at 707 separate loan products.
This is a hike from the previous record high of 637 in the second quarter of 2014.
At this point of 2013, there were only 458 available mortgage products at the end of the third quarter 2013.
“A burst of competition in the buy to let mortgage market is facilitating a greater choice between different mortgages than ever before,” added David.
“We’re seeing prudent landlords use that trend to find a fixed rate deal while rates are low.”