Buy-to-let like the rest of the mortgage market, has had a rocky time over the last couple of years but things have started to look up in the last quarter: With new entrants coming into the market and rental demand at record levels, there seems to be a growing appetite for the sector; especially from lenders.Robert Thickett, Editor; Mortgage Strategy.
The credit crunch caused smaller non-bank lenders to have to either withdraw from the market or substantially reduce their product availability due quite simply to lack of funding. At one point there were just eight lenders providing ‘widely available’ finance in the market. A huge reduction from the boom years.
Now there are almost 15 lenders back in the market and over two hundred products available to landlords. This has been helped by the recent return of Kensington and the new arrivals Aldermore and Precise into the buy-to-let field.
Deals at 75% are widely available again with 80% products re-emerging but priced for the risk premium. Whilst pricing for risk is still prevalent in the market some players bringing low fees products (such as Marsden Building Society) through intermediary channels are pushing the 3% fees of a year ago back towards 1%. Naturally some of the more flexible lenders are continuing to charge fees appropriate to the extra features and services they provide but we hope that downward pressure on fees continues.
Interest Only and Buy-to-Let
With interest only buy to let mortgages dominating the sector with very few people investing on a repayment basis there has been some concern with the substantial reduction in availability of interest only mortgages in the residential market. Luckily this has not borne out as of yet and there is little sign that interest only will be restricted in the buy to let sector.
Obviously we can never say never and there’s real interest in this area of lending which we have to monitor, but we don’t envisage this affecting buy-to-let for the foreseeable future, if at all.
Phil Rickards, Head of Sales BM SOLUTIONS
Outlook for the Future
Whilst most of the news about the buy to let market is good, this good news is driven by a shortage of supply and a demand for rental property. There are a number of ecomonic factors such as the austerity measures and a lack of sufficient funding to meet demand (which would lead to continued healthy margins on buy to let rates – not a good thing for landlords) which could put a dampner on the market.
Now is not the time to be complacent – it would be far too early to say that the buy-to-let market has fully recovered. Despite tehre bieng reasons to be optimistic, challenges remain and confidence from landlords actually fell in Q2Paul Howard – Head of Corporate Accounts, The Mortgage Works
One thing I would suggest is that our obsession with the past is unhealthy when it comes to the mortgage market. It is not true that the market of 2005 was normal, healthy or representative of a sustainable system. Lenders had seemingly unlimited funds and were prepared to advance these funds at high loan to values and with extremely small margins.
Clearly this is unhealthy and the rot which has torn through our financial system over the last few years is a feature of this. Higher margins, and tighter criteria might lead to a healthier market – one that is both sustainable and profitable for most of the parties involved. We can help you navigate the new and reforming market and find the buy-to-let mortgage you require.