The report, authored by housing economist, Martin Ellis, also predicts that interest rates are set to rise by a quarter of a point in the next few months and that house price growth will have slowed to between two and three per cent a year by the end of 2018.
The report covers the UK economy, the UK housing market, the private rented sector, buy to let mortgages, the impact of tax and regulatory changes alongside prospects and forecasts. It is available to download in full here.
Peter Beaumont, The Mortgage Lender deputy chief executive, had this to say: “Our special report on the buy to let market looks at the macro and micro economic environment for buy to let investors and the factors that are likely to influence landlords’ investment choices over the coming years.
It also highlights the need for a flexible and competitive buy to let mortgage market to facilitate continuing investment in a sector of the housing market that has grown in significance as home ownership has declined and demand for good quality residential property has increased.”
Key factors impacting the buy to let market:
Private rented sector has grown strongly over the past decade…
The private rented sector has grown substantially in recent years. One in five (4.7 million) households in England now rent privately. Nearly half of 25 to 34-year olds live in the private rented sector (46%); almost double the percentage in 2006 (24%). There has also been a considerable increase in the proportion of 35-44-year olds in the private rented sector over the past decade, rising from 11% to 29%.
BTL mortgages have played a key role in supporting the expansion of the private rented sector…
BTL mortgages play a vital role in supporting housing supply in the private rented sector. The BTL mortgage market represents nearly 13% of new UK mortgage lending. The market grew from 840,000 BTL mortgages outstanding with a total balance of £93.2bn at the end of 2006, to 1.8m BTL mortgages with an aggregate balance of £214bn by the end of 20155; growth of 114% and 130% in the number and value of balances outstanding respectively.
In recent years, BTL was typically the strongest performing sector of the mortgage market. There were annual increases in the number of BTL loans to fund house purchase of 21% in 2014 and 17% in 2015. New BTL mortgages increased by nearly 200% between 2010 and 2016 with their share of all mortgages rising to 20% in 2015.
But BTL mortgages for house purchase have fallen more than a quarter due to stamp duty changes…
There was, however, a significant fall in the number of BTL property sales following the introduction of the stamp duty charge for additional properties in April 2016. BTL house purchase declined sharply immediately, but has remained broadly flat since then, albeit at a much lower level.
BTL house purchase activity in 2017 was more than a quarter (-27%) lower than in 2016 with BTL purchases made with a mortgage averaging 6,240 a month in 2017 compared with 8,500 in 2016.
In value terms, BTL house purchase lending fell by 28% in 2017, from £14.9 billion in 2016 to £10.7 billion. Despite this decline, the total for 2017 was still 67% higher than the annual average during the period from 2009 to 2013.
There has been a further weakening recently with the number of BTL house purchase loans in the first three months of 2018 totalling 11% lower than in the same period of 2017.
Whilst BTL remortgages have been largely stable
In contrast to house purchase BTL lending, BTL remortgage activity has been very stable with the volume of lending in 2017 only 0.6% lower than in 2016. As a result, remortgages’ share of total BTL mortgage lending rose from 60% in 2016 to 67% in 2017 in volume terms.
