Buy to Let Mortgages

For buy to let and investment mortgages there are many schemes available.

You can research the market or get a qualified mortgage adviser to contact you.

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Buying a property to let has become very popular as an investment during the last 10 years. Many people have put their faith in bricks and mortar as a secure form of investment in the belief that this is, literally, 'safe as houses'. Particularly after the dot.com bubble burst in 2000, investors began looking for an alternative home for their money, and many found it in buy-to-let.

The historical backdrop to this situation is worth considering. Renting property to live in from private landlords was, in fact, the norm in the UK up to the turn of the last century. In 1914, for example, around 90% of housing stock was privately rented. With the arrival of mortgages and promulgation of new statutes compelling local authorities to take on the duty of providing affordable housing for the socially deprived, private lettings declined, so that by 1971 its share of housing had dropped to around 20%.

The final nail in the coffin came with the "Rachman" scandal of that period. A rather unsavoury landlord by that name was in the habit of using dubious practices to evict tenants and this became a cause celebre in the media. Under pressure, the labour government of Harold Wilson passed the draconian "Rent Acts" of 1974 and 1977. These enabled tenants to apply to the 'Rent Officer' to set a "fair rent", usually a paltry sum. This could not be varied and, in addition, the tenant became a "sitting tenant" and had security of tenure for life. Many landlords were ruined. The rest exited the rental market in a panic. These laws decimated the buy-to-let market. The only property that came on the market were usually those from owner-occupiers moving abroad to work, who were letting their only or primary residences and therefore could under the new laws reclaim possession on their return.

This state of affairs remained until prime minister Thatcher's government reversed the trend with the Housing Act of 1988 onwards, allowing private landlords to regain possession of their property and to seek market rents rather than 'fair rents'. Landlords gradually plucked up courage again to re-enter the rental market and, as mentioned earlier, the stockmarket tumble of 2000-2003 gave further impetus to the market.

With increasing liberalisation of mortgages as well as economic and social changes, such as job mobility, smaller households, rising house prices forcing potential first time buyers, unable to get on to the housing ladder, to rent rather than buy and economic buoyancy drawing inward immigration, the buy-to-let phenomenon has now become an established part of the UK's housing landscape. In this respect, the UK is simply playing catch-up with its continental partners. In Germany for example, private renting accounts for over 60% of housing in comparison to the UK's still paltry 10% - albeit growing.

It can be seen from the foregoing that housing, in particular the buy-to-let element, is highly sensitive to political decisions. However, assuming that no drastic legislative changes are in the offing, aside from such fine-tuning as the recent HMO legislation, then social and economic factors would tend to suggest a healthy prognosis for the buy-to-let market, provided this is considered as a long-term investment.

New lending for buy-to-let mortgages in 2005 was £24.5 billion. For 2006 it is estimated to exceed £35 billion. Of this, net lending, or balance growth, could be £20 billion, so that total outstanding buy-to-let mortgage balances may amount to £95 billion. However, it is estimated that the total loan to value (LTV) in the private rental sector is only around 24%.

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THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE. CHANGES IN THE EXCHANGE RATE MAY INCREASE THE STERLING EQUIVALENT OF YOUR DEBT.

Please note that Arbor Mortgages is neither a lender nor a mortgage broker. This is an information only website. We provide generic information to help you gain a better general understanding of mortgages. If you would like advice related to your particular circumstances, would like a quotation, or would like to arrange a mortgage, then you can get an authorised mortgage adviser from Trustguard to contact you by completing & submitting this form. We introduce to Trustguard, who are regulated & authorised by the Financial Services Authority (FSA).

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