Buy to let mortgage market in UK may never be what it was

The buy to let market in the UK has taken numerous financial hits and may never be what it was again, it is suggested after the latest lending figures show that lending fell in September.

The data from UK Finance show that overall total mortgage lending fell but remained higher than a year ago with the buy to let sector seeing a monthly fall of 9%.

Experts suggest that with new changes to lending criteria buy to let lenders are set to find it harder to get a mortgage but the outlook is positive for those who stick with it and there is more access to specialist lenders than there used to be.

Overall the figures show that first time buyers borrowed £5.1 billion in September, down 11% month on month but still 4% higher year on year with the number of loans down 10% on a monthly basis and up just 1% compared to a year ago.

Home movers borrowed £6.9 billion, down 18% month on month but 6% up year on year while remortgage activity totalled £6.4 billion, unchanged from August but 16% higher than a year ago.

Gross buy to let lending totalled £2.9 billion, down 9% month non month but up 4% year on year with the number of mortgages down 8% on a monthly basis but up 4% year on year.

‘Although lending slackened in September, it remained higher than a year ago. Remortgaging was particularly strong, with borrowers seeking to lock into historically low interest rates in advance of the widely anticipated rise in Bank base rate at the beginning of November,’ said UK Finances head of mortgage policy June Deasy.

‘Over the last year, the number of loans for remortgaging has been higher than in any period since 2009. Low borrowing rates mean that mortgage repayments as a proportion of income remain at or close to their historic low point. While this ratio may edge upward in the coming months, monthly mortgage payments will remain affordable for the vast majority of borrowers,’ she added.

According to Jeremy Duncombe, director of the Legal & General Mortgage Club, buyers will still be able to take advantage of low interest rates and he believes that the housing market remains in a strong position.

‘The Bank of England might have recently raised the base rate, but the return to 0.5% is likely to have just a limited impact on the market. If anything, it should act as a wakeup call for those coming to the end of their term who haven’t yet remortgaged,’ he said.

However, Mark Dyason, managing director of specialist broker Thistle Finance, while the figures from UK Finance show that the buy to let market is proving to be fairly resilient it has been battered.

‘Buy to let is not what it was, and will never be so again, but you get the feeling that the landlords who are still in it have started to find their footing and are feeling more confident. What we’re seeing a lot of, especially among portfolio landlords, is a shift towards specialist lenders as high street banks implement the new tougher stress testing rules,’ he explained.

‘Buy to let is increasingly morphing from the mainstream into a specialist area of finance. Thankfully, there is no shortage of specialist lenders willing and able to accommodate the new breed of landlord,’ he added.

Lea Karasavvas, managing director of Prolific Mortgage Finance, also believes that landlords will have to look beyond the high street for borrowing. ‘Owner occupiers and landlords are not on the same page. Home owners have been grabbing low rates while they can while the response from landlords has been far more muted,’ he said.

‘This demonstrates a sustained shift as many turn their backs on the market. Landlords are waving the white flag after a severe tax bashing from the Treasury over the last two years. This is a statement of intent. Being a landlord is not a hobby, it’s an investment that must pay or it’s simply not worth it,’ he pointed out.

‘The number of remortgages by home owners has risen faster than for landlords in the last year and, more recently, is falling slower. Many landlords are effectively signalling that the good times are over and they don’t intend to stick around long enough to justify committing to a new deal,’ he warned.

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