Buy to let in a post-MMR landscape

[SPECIAL FEATURE: Lucy Hodge, Vantage Finance]

Related topics:  Specialist Lending
Amy Loddington
8th May 2014
iStock_000001661861Medium.jpg

The growth of buy-to-let lending has been reported on avidly and the figures seem to stack up.

April saw the release of the Bank of England’s quarterly Trends in Lending assessment, which noted that while overall lending to businesses has remained negative in the three months to February 2014, overall mortgage lending has continued to grow. Mintel’s buy-to-let-specific report in March revealed a 21% increase in the number of buy-to-let loans in 2013, compared to 2012.

The BTL market has continued to see growth since 2013 thanks to a number of factors, such as the increase in the range of products available and the more buoyant mood amongst investors as the UK’s economy improves. Strong demand for rental properties can also be attributed to population expansion, rising house prices and, with the MMR changes now in place, the stricter lending criteria surrounding residential mortgage applications. With this continuing demand for rental properties and still-low rates, property investors can see a good return on their investment. A note of caution should be added here though – while there have been only three monthly decreases in house prices over the last fifteen months, prices may not continue to rise as quickly as they are at the moment.

The media coverage of MMR has not been without some negative viewpoints. Despite the MMR being five years in the making, and many lenders ensuring they were MMR-compliant before the new regulations came into force, there has been a constant flow of hype surrounding the market changes. The market is no stranger to change and has managed to adjust to different regulations before, so the scare-mongering in some of the media seems misplaced. A period of adjustment is always necessary as brokers, lenders and borrowers get to grips with new processes, but the likelihood of long-term problems is low.

Another theme running throughout the MMR discourse is that whilst it is the residential mortgages that will be directly affected by the MMR, there will be an indirect effect on the BTL market. The stricter lending criteria and increased focus on affordability have generated fears that people will now find it harder to obtain an owner-occupier mortgage or may be dissuaded from buying before even applying. This has raised the suggestion that potential borrowers will turn to renting as an alternative, causing the private rental market to grow.

As a packager we have the benefit of being able to see the view from both the broker and lender sides of the fence. The growth in BTL pre-MMR and its predicted increase post-MMR will result in increased work for brokers in this sector. As borrowers will need more guidance with the new regulatory changes in place, it has also been posited that greater numbers of clients will head directly to brokers instead of lenders in order to gain independent advice, have their documentation checked and their mortgage application put together all in one place.

In conclusion, it’s encouraging to see the BTL market is continuing to grow. The MMR may well contribute further to the BTL market’s growth, but as interest rates rise, it may not last forever.

More like this
Latest from Property Reporter
Latest from Protection Reporter
CLOSE
Subscribe
to our newsletter

Join a community of over 30,000 intermediaries and keep up-to-date with industry news and upcoming events via our newsletter.