Name: David Whittaker
Company: Mortgages for Business
Buy-to-let (BTL) landlords face many headaches in running rental property businesses. They have to comply with more than 200 statutes from seven different government departments but the credit crunch has given them two colossal migraines – tenants have struggled to pay and lenders have been unable to fund them. Are things getting any better?
Tenant demand is improving, allowing landlords to be selective about granting tenancies – many more landlords now use tenant referencing as a matter of course. But with the public sector already set to shed up to 250,000 jobs in the next year on current spending cuts, tenant arrears will become an issue again. Longer term, landlords will take comfort that first-time buyers will continue to struggle to afford mortgages and rental demand will be further sustained by the failure to build new homes at anywhere near the rate of 200,000 dwellings promised by the Government three years ago.
Growth of landlord portfolios has been curtailed by lack of funders and those that remained have had their own challenges to address in 2008 and 2009. With BTL mortgage arrears now firmly under control and some credit lessons learnt there is a gradual improvement of product ranges and lending appetite in Q2 2010. The imminent launch of Aldermore into both residential and BTL sectors is a welcome addition and professional landlords could soon have a range of more diverse products available to them once again. Headaches will come and go but these migraines are receding.
Name: Chris Norris
Company: National Landlords Association
Landlords are hopeful, but not ready to rejoice just yet. The NLA is often asked if it is a landlords’ market, or if current conditions are more likely to favour tenants over those who have invested in bricks and mortar. Over the last 12 months in particular, the topic of conversation has been identifying the right time to buy.
In truth, the answer seems to be that now is as good a time as any to invest and that medium to long-term landlords are very likely to benefit from a market which, although unlikely to sky rocket, has ceased its decline and looks to be recovering.
Although arrears are still an issue, rental demand remains very strong and rents appear stable. In addition, despite the effects of the downturn, property prices remain too high for many of those who would otherwise step onto the housing ladder meaning that tenants are choosing (or having) to stay in rented accommodation for longer.
However, landlords are not getting everything their own way. Crucially, competitive buy-to-let products remain hard to find and individuals keen to invest are finding it difficult to make new acquisitions cost effective given the price of borrowing.
The recent spike in inflation has exemplified the importance of economic factors as many landlords relying on low interest rates will be very concerned about the prospect of interest rate hikes. Whoever forms the next Government after 6 May, the rate of economic recovery will be the primary concern of ambitious property investors – with particular focus on how to get credit flowing again.
Name: John Heron
Company: Paragon Mortgages
Buy-to-let performance data has been improving since the second half of 2009. Over the past nine months, arrears have been in decline, lending levels have been growing, accidental landlords have been leaving the market and rents have been increasing.
Tenants are benefiting from better economic conditions and this is reflected in declining rental payment defaults, a fact also evidenced by Paragon’s PRS Trends report. This ultimately filters through to the financial performance of buy-to-let borrowers and Council of Mortgage Lenders’ arrears data shows consistent improvement in recent quarters.
All these factors point to a buy-to-let market in rude health, and investor demand is extremely strong – three times as many landlords plan to buy over the next 12 months than sell, according to the Association of Residential Letting Agents.
Moneyfacts data shows there were 3662 buy-to-let mortgage products for investors to choose from at the peak of the market in August 2007. Today, there are approximately 250.
We have seen improvements in the wholesale funding markets since Lloyds Banking Group reopened the RMBS sector in September last year and the first quarter of 2010 has seen four major RMBS issuances. However, we won’t see a sustainable recovery in the buy-to-let market or the mortgage market as a whole until the wholesale money markets are fully functional.
Only then will we have the mortgage funding capacity capable of meeting demand.
