The Future’s Bright for Buy-to-let

Published: 01/06/2011

There has been a significant growth in buy-to-let mortgages on offer over the last 12 months. The number of B2L mortgages available has increased from 299 to 463 with 64 lenders now offering B2L deals, compared to 48 last year¹.

The average interest rate on a B2L mortgage is down to 4.97% against 5.3% in May 2010¹.

The buy-to-let industry was badly affected by the financial crisis with lenders withdrawing many B2L products. However, there now appears to be light at the end of the tunnel.

B2L sales are up 6% in the last six months and the Council of Mortgage Lending estimated the sector grew by 7% in 2010².

The primary reason behind this encouraging resurgence is the increased demand for rental properties given the difficulties faced by current home buyers and first time buyers in particular.

But while first time buyers continue to struggle to clamber on to the property ladder, professional landlords are flourishing. Lower property prices are allowing them to increase their portfolio and with an increase in available deals again, B2L mortgages are more competitive.

The increased demand in the rental market also means tenants are staying longer, having limited options and choice. This has caused a decrease, on average, in the length of time a property is empty for; 30.9 days compared to 36.4 this time last year².

Landlords have even been able to increase their rents. 32% of landlords raised their rents in Q1; 20% by up to 4% and 5% by up to 8%².

It isn’t all a bed of roses however. If there is the slightest drop in house prices, 30% of B2L borrowers could find themselves in negative equity, Standard Poor’s Financial Services warn¹.

¹Source: Mortgage Strategy (May 2011)
²Source: Mortgage Strategy (May 2011)

Content correct at time of publication