Buy-to-let investments soar as first time buyers continue to struggle

The Momentum UK Team 11 May 2012

While the housing market remains bleak for first time buyers, the number of landlords buying properties to let is increasing rapidly, according to recent figures.

Mortgages lent to first time buyers are at their lowest since July of last year. Research by chartered surveyors, E.serv highlights that 11,037 mortgages were offered to new buyers in April which is also a 5pc decrease on March’s figures.

32,300 mortgages were secured by buy-to-let landlords in the first three months of the year, according to figures collated by the Council of Mortgage Lenders (CML). This marks a 32pc increase on the the first quarter of last year,

Property experts believe that the combination of falling house prices in many areas and increasing rent has made it an attractive time for landlords to purchase properties to let out.

As mortgage lenders tighten their lending criterion to avoid risky investments, buy-to-let landlords can often provide the larger deposits that they require as opposed to new buyers.

Richard Sexton, Business Development Director of E.serv:

“Buy-to-let landlords are taking the places of first-time buyers as there is an absence of them in the market place because they can’t get loans.”

The loan-to-value rate tends to be higher for buy-to-let investors with the average maximum rate standing at around 75% meaning landlords are required to pay more upfront than 5 years ago when they could borrow at an 85% loan-to-value rate.

David Whittaker of Mortgages for Business:

“The year-on-year rise in buy-to-let lending reflects the state of the overall property market. Demand for rental property is as strong as ever as mortgage funds remain out of reach for many would-be buyers and high-street banks remove scores of owner-occupier mortgages from the market.”

Private rental opportunities seem particularly fruitful in the London area. With the Olympics in our midst and rental prices booming, Mark Harris, CEO of SPF Solicitors stated that ‘income is strong and returns favourable’ for many buy-to-let investors.

Despite the recent increase of buy-to-let lending, the figures are only about a third of the levels they were in 2007. Matt Hutchinson, Director of said:

“Will buy-to-let lending every return to 2007 levels? With average loan-to-values on buy-to-let mortgages at 75 per cent and average minimum rental cover at 125 per cent it is unlikely, as 25 per cent deposits will prevent a large number of people, particularly amateur landlords, from buying rental property.”