Sharp rise in buy to let investors

Posted on January 9th, 2012 | Categories - News

New research has shown that buy to let investors are one of the few beneficiaries of the tight lending criteria, which continues to grip the mortgage market and has done since the credit crunch of 2007.

Figures from the high end estate agent Savills show a 40% jump in the number of homes owned by buy to let landlords, with nearly 20% of all residential properties now owned by investors.

The data from Savills was backed up by figures released by the Council for Mortgage Lenders (CML) which showed a 16% rise in the number of buy to let mortgages in the third quarter of 2011.

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First time buyer mortgages

It seems that as lending criteria has tightened, the number of people able to buy property has shrunk, leaving a gap in the market which has been filled in part by buy to let investors.

Mortgage lending criteria has tightened for most groups, especially first time buyers, who are often competing with buy to let investors for the same property. Prior to the credit crunch first time buyers could secure a mortgage with just a 5% deposit relatively easily, in many cases no deposit was needed with some lenders infamously lending more than the value of the property.

Now though the situation is very different with only a handful of deals over 90% loan to value available to first time buyers.

Buy to let mortgages though have not been hit as hard, and many property investors do not need a mortgage, putting them in a strong bargaining position as cash buyers.

Rental yield

Whilst property prices in most areas have fallen since the end of the property boom in 2007, making it cheaper to buy, it seems that it is that yield which is tempting buy to let investors into the market and not the possibility of capital appreciation.

The combination of all time low interest rates, when even the best savings interest rates struggling to match inflation, and rising rents, are clearly encouraging investors to look to property for an attractive yield or income.

The volatility or work stockmarkets may also have contributed to a an increase in demand for buy to let properties as investors seek a steady income.

Property experts point out that if the situation continues first time buyers will be marginalised still further, losing out to buy to let investors who find it relatively easy to secure a mortgage or who are cash buyers.

Help for first time buyers

A small number of mortgage lenders have started to offer higher loan to value mortgages aimed at first time buyers, however these often have tight conditions and in some instances require a mortgage guarantor.

Towards the end of 2011 the government announced a raft of measures, many specifically aimed at helping first time buyers, only time will tell whether they will be enough to help the beleaguered group and slow down the latest buy to let boom.

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