The latest Complex Buy to Let Index has revealed that the average buy-to-let property was purchased for £310,918 in the second quarter of 2017. This compares to an average purchase price of £413,713 in the last quarter of 2016.
Landlords are looking to cheaper properties that maximise income from a low cost investment. Tax relief on interest payments for commercial mortgages has been cut. Cheaper mortgages mean that landlords will save on tax, but HMRC will receive less revenue.
The average rental yield on buy-to-let properties is currently 5.5%, which is a small decrease of 0.2% from the first quarter of 2017. Yields on semi-commercial properties are higher at 8.7%.
Competition in the buy-to-let commercial mortgage market is fierce and this has kept interest rates low. Commercial mortgage offers are often subject to fees, but many lenders have reduced these in the second quarter of 2017. The average flat fee is £1,370, down from £1,446 in the first quarter of 2017. A recent study found that 11% of buy-to-let loans in the second quarter of 2017 were subject to no fees.
Many landlords are focusing on buying lower-value properties and using a mortgage broker to negotiate a commercial mortgage deal at good interest rates, often with reduced fees as well.
A mortgage broker has relationships with a number of lenders and can find the best value commercial mortgage deal for the first-time buy-to-let landlords, or the landlord wanting to expand his or her property portfolio.