How the right data shapes the right mortgage products
Paul Fryers, Managing Director of Zephyr Homeloans, discusses the latest findings from the Deposit Protection Service and why this is good news for brokers and landlords – particularly those with specialist buy-to-let requirements.
New data from the Deposit Protection Service (DPS) suggests that renting is relatively more affordable at present than at any time since 2013. Over the last 12 months, the average UK salary has risen to £30,353, whilst the percentage of wages spent on renting declined to 30.80 per cent during Q4 2019.
The average UK monthly rent is £773, a slight decline on the previous quarter. When you look at the data over the past 12 months, the average UK rent did lift by £11 – but this figure is lower than the hikes predicted by several market commentators following the introduction of the Tenant Fees Act on 1 June 2019.
These new regulations saw several types of common landlord and letting agents’ fees being banned and resulted in landlords in England being limited to asking for five weeks’ of annual rent for the deposit for both renewed and new tenancies. This increases to six weeks should the annual rent stand at £50,000 or more.
There were murmurings in the market that rents might rise, in order to shoulder the impact felt by letting agents and landlords. However, the DPS Rent Index suggests this hasn’t been the case – and indeed, the average deposit has fallen to £828. In the six months leading up to the legislation, this figure was £905.
Having data like this to hand is invaluable for brokers and their landlord clients, to enable them to make the right strategic decisions for their portfolio. DPS is part of the wider Computershare group, and so too is Zephyr Homeloans. Having such a rich source of data within the group helps us build a clear understanding of the private rental sector, which can shape the Zephyr Homeloans proposition, so it best meets the needs of brokers and their clients.
So, what does this mean for landlords?
Whilst landlords will of course want rent values to remain strong, an affordable rental market will be attractive to tenants. Essentially, they are the key ingredient to a buoyant market. At Zephyr Homeloans, we are seeing landlords seeking to enhance yields in their portfolios by diversifying geographically (particularly to more northerly areas) in order to access greater returns. According to the DPS Rent Index, the North West, Northern Ireland, Wales, the South West, London, the East Midlands and the East all experienced average private rental price lifts over the last quarter. The North East is the cheapest region for renters in the UK, with an average rent of £518.
We are also noticing increased interest from investors who wish to purchase specialist properties such as House in Multiple Occupancy (HMO). We understand this area can sometimes be a tricky route to navigate, but once the right product is in place, HMOs can pay dividends for landlords, with a higher rental yield from the property than would otherwise be the case. At Zephyr Homeloans, we offer specialist mortgage products for HMOs of up to six bedrooms and up to a loan maximum of £1 million for individuals and limited companies.
Across our criteria and products as a whole, some of our highlights include a maximum age of 95 at the end of the mortgage term, flat above commercial properties, landlords with DSS tenants and UK permanent Right to Reside.
We believe this strong combination of working closely with DPS as part of the wider global Computershare group (a financial organisation with a market capitalisation of around $9 billion), puts Zephyr Homeloans in a unique position to offer both standard and specialist products that landlords and investors are searching for, as well as providing the guidance and support to ensure they achieve the best returns on their portfolios.
Paul Fryers, MD of Zephyr Homeloans