| This summer marks the Tenth anniversary of the | | | | products with high interest rates, up to 4 per cent over |
| buy-to-let mortgage. In July 1996 Mortgage Express | | | | Bank of England base rate, and low loan to values up |
| (part of the Bradford & Bingley group) were the | | | | to a maximum of 75 per cent. Historically, rental cover |
| first to trial a dedicated buy-to-let mortgage product, | | | | had to equal 130 per cent of the mortgage to protect |
| and currently has a market share of approximately 20 | | | | both the lender and the landlord against voids and the |
| per cent. | | | | higher risk. |
| Buy-to-let mortgages evolved after new legislation | | | | Landlords now benefit from an average loan to value |
| within The Housing Act gave landlords more power to | | | | of 85 per cent, and rental cover now averaging 125 |
| evict tenants who were not keeping up with their rent. | | | | per cent of the mortgage payment. Although lending is |
| In September 1996, the Association of Residential | | | | available to 90 per cent and rental cover at 100 per |
| Letting Agents (ARLA) launched these loans via a | | | | cent. |
| panel of lenders, and hence the buy-to-let mortgage | | | | Recent research revealed that 83 per cent of |
| arrived in the UK property marketplace. | | | | landlords plan to increase or maintain their portfolios in |
| Relaxation of criteria reflects the realisation that | | | | the next six months, showing that the appetite for |
| buy-to-let is not as risky as lenders first thought. There | | | | investment remains. The average property portfolio |
| are now around 70 lenders offering the buy-to-let | | | | has increased from three per landlord in 1996 to seven |
| product however albeit that around 50 per cent of all | | | | this year. |
| buy to let loans are written by the 6 members of the | | | | Buy-to-let lending has grown from £3.1 billion in |
| ARLA panel:Paragon, GMAC, Mortgage Express, | | | | 1999 to £24.5 billion during 2005 and the market |
| Birmingham Midshires, NatWest and The Mortgage | | | | alone is worth over £73 billion and still growing. |
| Business. | | | | The fragility of world stock markets and the pensions |
| A risk analysis of buy-to-let versus residential shows | | | | crisis has ensured that more and more investors are |
| residential loans have a higher risk profile. Latest | | | | turning to bricks and mortar to secure their future. |
| figures from the Council of Mortgage Lenders showed | | | | Whilst the increasing student, single person and migrant |
| that 0.68 per cent of buy-to-let mortgages had been in | | | | population will continue to support the rental sector, |
| arrears for more than three months, compared with | | | | growth in rented households is predicted to be around |
| 0.97 per cent of normal loans. | | | | 3 per cent over the next ten years. However the |
| High house prices and a growing population have | | | | downside is for first time buyers, who are often vying |
| meant that more people are now renting for longer, | | | | for similar properties as buy-to-let investors, despite |
| fuelling the demand for rental property. Amateur and | | | | government assurances of support the growth in the |
| novice landlords alike who have enjoyed success | | | | buy to let market could well herald the decline of the |
| after dipping their toe into the water with one or two | | | | first-time buyer. |
| properties now have the confidence to further | | | | With rising property prices and diminishing rental yields |
| increase their portfolios. | | | | First Mortgage Trust have designed a buy-to-let rental |
| Over the past decade the sector has enjoyed | | | | calculator that takes some of the guesswork out of |
| exceptional growth, to now represent approx. 8 per | | | | the initial process which can be found under the |
| cent of total housing stock in the UK. The first | | | | calculator section at their website. |
| mortgage deals were inflexible, commercial style | | | | |