Increasing rents & available lending means things are looking good for landlords
Following the recession & the ‘crash’ of the buy to let market it looks like once again things are on the up. Reported figures indicate that over the last year the number of buy to let loans that are available for landlords has doubled & over the last weeks the figure appears to be rising rapidly.
The constraints that were applied to lending during the credit crunch are being relaxed by some of the big lenders with both loan ceiling levels & loan to value levels on the rise. Interest rates on loans are also being cut by some lenders.
Specialist buy to let lenders who ‘closed their doors’ are gradually returning to the market too. For example Mortgage Trust – part of the Paragon Group – is back after 3 years with a promise of cheap & easy mortgages for the smaller landlord.
With first time buyers finding it difficult to get onto the property ladder many are either being forced or opting to rent.
David Newnes – a spokesman from LSL Property Services which is the largest network of letting agents in the UK – said: “Landlords are seeing demand for their properties go from strength to strength. First-time buyers simply can’t afford the average £25,000 deposit required and, as a result, most are remaining in rented accommodation for nearly a decade.
“The growing demand continues to outstrip supply, and this is pushing rents upwards beyond the rate of inflation, and well above wage rises.”
With the subsequent ever increasing demand for rental properties rents being pushed up, this is enticing lenders to view landlords as a good investment for their money. At the expense of first time buyers lenders are choosing to give mortgages to landlords instead. At a recent industry debate hosted by HSBC one of the major lenders – Nationwide – said: “As a lender, we would rather lend 75% LTV [loan-to-value] on a buy-to-let mortgage to an experienced buy-to-let investor, than to a first-time buyer at 95% LTV.”
Stuart Law – chief executive of the property investment firm Assetz – told the industry magazine Mortgage Strategy that: “Lenders are making no secret of the fact that they would rather allocate the limited funds they do have to the lower-risk option of buy-to-let loans, with deposits of 25-40%, than first-time buyers loans with 90% LTVs . As a result, the buy-to-let sector is recovering at a remarkable rate.”
While potential landlord may be happy with the news, critics point to the negative effect for first time buyers as well as potential financial implications such as were experienced with speculative behaviour prior to the credit crunch following which 8 out of the top 9 buy to let lenders in the UK were rescued, closed or severely curtailed.
Categories : Buy To Let