Buy-to-let opportunities are still immense and with over 80% of all loans coming through the intermediary channel it is easy to see why, as an industry, we love it. Buy-to-let accounts for nearly 15% of the total mortgage market and is growing quarter-on-quarter. Total buy-to-let lending is likely to hit £25bn in 2014, up 20% on the 2013 total.
With the private rented sector continuing to increase and currently accounting for almost 4 million households in the UK, there is no shortage of tenants looking for rented accommodation. The choice of lenders has expanded and established players have become more competitive, with high street names and challenger banks all looking to lend more on buy-to-let in 2015. Mortgage rates have never been lower, which is providing a healthy market for both the investor and lender alike.
A few interesting statistics. The UK population is projected to rise to 73.3m by 2037 up from 63.7m in 2012. One person households are projected to rise by around 61,000 a year between 2011 and 2021. Also net migration has fallen by a quarter since the 2005 peak from 320,000 to 243,000 in 2014. The Mortgage Works is seeing more new landlords entering the market and they are in it for the long term with over 40% stating they are looking to hold their investment for 40 years plus. Confidence is high and one third of all landlords expect to see capital growth over the next six months.
Approximately three quarters of landlords are looking to buy-to-let to support their pension so it is important to be looking at upper-age caps with lenders. A quarter of all landlords are looking to grow their portfolios over the next 12 months and over 50% of all landlords are letting their properties through letting agents, which is of course a potential lead source.
Opportunities are out there for intermediaries as the CML reports that one in five buy-to-let loans are held in closed lenders’ books, most of which will be free to leave now. The Bank Base Rate will of course eventually rise but there are question marks as to whether it will be in 2015 or 2016. Of course, the 2015 changes in pension legislation will enable people to access their pension pots without buying an annuity and buy-to-let could well benefit as a result.
The European Credit Directive may well present a challenge for lenders to separate the ‘accidental landlord’ and the definition of exactly what this means will need to be clarified. Since the buy-to-let market really came into play in the late 1990s, we have seen a nation of landlords grow. Buy-to-let is seen as an investment that everyone understands because we have a love of property, we can see it, change it and use it for kids to go to university and receive an income. At the end of the day it is a long term investment which will generate a capital return as well as regular income. It’s simple – rates have never been so low and long may it last.
Sally Laker is managing director of Mortgage Intelligence and Mortage Next
