Buy to let: Lending to landlords soars, as eviction rates rise

Posted on September 11th, 2013 | Categories - News

Buy to let: Lending to landlords soars whilst eviction rates also riseNew figures have confirmed previous reports that the buy to let sector is booming.

Data released by the Bank of England, shows lending to buy to let landlords has increased by 29% in the three months to the end of June 2013, compared to the same time last year.

Lending to first time buyers has also increased at a similar rate, confirming that both groups, who often compete for the same property, are benefiting from Government initiatives, which have kept interest rates low and made mortgages more accessible for first timers.

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Buy to let landlords are also benefiting from rising rents; which are hurting would-be first time buyers. According to the Countrywide Monthly Lettings Index the average rent rose in August to £867 per month, a two year high.

Interest rates still falling

The Bank of England data also confirms interest rates are still falling, particularly on popular fixed rate products, which are currently being used by 80% of borrowers.

The figures show the average fixed rate has fallen from 3.65% at the start of the year to 3.47%. The Funding for Lending Scheme, introduced in August 2012, is the main reason for falling interest rates, as mortgage lenders take advantage of a cheap source of wholesale finance.

However, the Help to Buy Scheme has also helped first time buyers get onto the property ladder, although there is mounting concern that Government initiatives could lead to another housing bubble. Only today, the Business Secretary, Vince Cable, said: “We should certainly think about how it should come into effect, indeed whether it should come into effect, in the light of changing market conditions. We don’t want a new housing bubble.”

Eviction rate rises

Despite the boom in buy to let lending, it isn’t all good news for the sector, as new figures show the number of evictions has risen to record levels.

New figures, from Sweet & Maxwell, have shown a 9% increase in the number evictions over the past 12 months; a five year high.

The rising cost of renting, coupled with stagnant wage inflation, could be behind the increase. However, some experts believe the Government’s ‘bedroom tax’ could be to blame, as tenants struggle to make up the shortfall following a cut to their housing benefit.

It is also possible some landlords are taking advantage of a strong rental market and are more willing to evict problem tenants, safe in the knowledge that a replacement will be found easily.

Are you a first time buyer or a buy to let investor? Do you need mortgage advice?

Our mortgage adviser, Linda Wood, is here to help you.

If you would like advice on your options please call  Linda today on 0115 933 8433, alternatively enquire online or email linda.wood@investmentsense.co.uk

Your home may be repossessed if you do not keep up repayments on your mortgage.

For providing mortgage advice we will charge an application fee of £300 and we may also be paid a fee from the lender, any fee paid by the lender will be disclosed to you. Alternatively we will charge an arrangement fee of 0.5% of the loan and refund to you any payment received by us from the lender.