Is There a Buy To Let Boom?

by Mark Johnston

Is There a Buy To Let Boom?

With house prices high and rising, and the supply of new homes woefully low it seems that more people are renting, and renting for longer.

The number of rental properties has skyrocketed in the last ten years from 2 million in 2000 to 3.6 million today. 

property signBanks and building societies have said their lending to landlords was at its highest in five years, and more than 30 per cent higher than last year.

Jackie Bennett, the council of mortgage lenders (CML) head of policy, said “Strong rental demand is contributing to the continuing expansion of the buy to let sector, but growth is also being helped by improved conditions in funding markets and more widespread availability of mortgages”.

Some financial experts have suggested that the costs of buy to let mortgages had fallen nearly 25 per cent since last year.

Mortgage broker Springtide Capital said there had been a new wave of mortgages to entice landlords and those venturing in to residential property letting. Its top picks include Clydesdale building society’s two year fixed mortgage at 3.59 per cent and a £1,999 fee for those with a 30 per cent deposit.

It appears however that individual lenders are coy about just how much business they are doing with landlords.

For instance Nationwide Building Society, lent £3.3 billion to landlords in its last accounting year, representing a fifth of the market. Although against the wider backdrop of Nationwide’s entire mortgage book, which is over £135 billion, the figure is relatively small.

Many consumers have also voiced their concerns but buy to let lending and they have stated that “This was not what building societies were set up for, we invested thinking we were helping people buy their first homes, not buy to let landlords.”

Lloyds Banking Group, has also come under attack, as it is probably the single biggest lender to landlords and this something that many taxpayers, who rescued the giant group in the midst of the financial crisis, find disturbing.

The Strategic Society Centre, a think tank, feel that buy to let landlords are blocking first time buyers from getting a foot on to the property ladder and are a barrier to social mobility.

The think tank has therefore proposed that mortgage lenders be restricted to lending only 5 per cent of their book to buy to let landlords.

A recent report has also suggested that the government should  lead a public debate about the future of the private rental sector and it is impact on society, including radical measures to transfer more households out of the private rental sector and in to home ownership.

It seems then that in conclusion, there has been recent speculation about a possible boom in the buy to let market, but many market experts believe that it is a long way off reaching lending levels of anywhere near those seen in 2007, therefore what is actually being seen is merely more progress in a recovering market in general

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