Deposits from buy-to-let landlords have increased by 15% to an average £100,000 compared to struggling first time buyers.
The Mortgage Advice Bureau report includes figures for remortgages and new loans to buy properties with buy-to-let landlords applying for mortgages with £99,914 for a deposit, £13,289 more than last year.
Higher deposits result in lower loan to values which have reduced from 62.2% last year to 56.5% now. As loan to values decrease lenders offer better deals with lower interest rates therefore reducing the cost of a mortgage.
After recent changes to pensions retirees are also cashing in their funds and competing with established landlords and first time buyers for properties.
After recent changes to pensions retirees are also cashing in their funds and competing with established landlords, first time buyers and home movers for properties.
Mortgage terms reducing
The report shows buy-to-let landlords require a shorter term for their mortgages. Only 62% have terms of 25 years and this reduced to 52% in the fourth quarter of 2014.
For shorter terms of 15 to 24 years the numbers of borrowers have increased from 29% in 2013 to 41% in 2014. According to the data buy-to-let landlords require mortgages of £129,964 based on an average £229,878 purchase price.
In contrast, due to affordability reasons first time buyers are extending mortgage terms to reduce the cost of the monthly payments.
This compares to the UK average where the Nationwide property price index shows average prices have reduced from £188,446 in January to £187,964 in February.
Buy-to-let mortgage lending soars
Last month the Council of Mortgage lending (CML) survey showed the number of buy-to-let loans increased by 13% to 54,000 and increased 26% by value to £7.7 billion.
During 2014 the total numbers of buy-to-let loans were 197,700 increasing 23% and by value £27.4 billion increasing 32% on the previous year.
The higher deposits from landlords is lowering the average interest rates paid and with a 40% deposit a buy-to-let mortgage can be 4.2% for a five year fixed rate.
This compares to an equity release mortgage buyer securing fixed rates typically from 5.4% upwards without any evidence of earnings, important for borrowers with only pension income.
For remortgage buyers at the end of your mortgage deal, to avoid the lenders expensive variable rate you can switch to a preferential rate reducing your monthly repayment costs.
Even though buy-to-let landlords only need to have a 25% deposit for a purchase, they still choose a larger deposit of 43.5% to reduce the cost of borrowing.
What are your next steps?
Call our LCM mortgage brokers if you are a buy-to-let landlord with a property, remortgaging and want the best mortgage deal, buying your first home or you are planning to move home.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your home to spend on anything such as repay an interest only mortgage or pay for care at home.
Learn more by using the mortgage monthly cost calculators, property value tracker chart and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
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