MortgagesJul 23 2014

Buy-to-let bonanza as sector expands 40% in a year

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The number of products on the market to service the growing interest in buy-to-let mortgages has risen to highs not seen since 2008, according to data from Moneyfacts, with the number of products on offer in July was up by 43 per cent to 665 compared to July 2013.

At the same time, average interest rates charged for both fixed and variable deals have fallen to the lowest levels ever, at 4.17 per cent for the average fixed rate and 4.03 per cent for the average variable rate.

Sylvia Waycot, editor at Moneyfacts.co.uk, said: “Lender interest in the buy-to-let market may be fuelled by the knowledge that it falls outside of the recent Mortgage Market Review.

“This makes the process of granting any buy-to-let mortgage quicker and simpler as it is not subject to the new affordability criteria that is starting to clog up the mainstream mortgage market.

“In addition, the new pension regime means that retirees could consider buy-to-let as a way of supplementing their income instead of purchasing an annuity.”

Ms Waycot said that Help to Buy is attracting potential borrowers into the housing market, but the advent of MMR is acting “almost like a contradiction” by putting the brakes on the process, while the funding element, “although sensible”, is making it harder for some to get onto the housing ladder.

She said: “Ultimately this all points to the buy-to-let market being here to stay and to remain attractive to lenders, hence the surge in products on offer for landlords who seem assured of a healthy supply of tenants.”

Last week the Treasury Select Committee once again considered bringing BTL loans under the regulated mortgage umbrella.

Royal Bank of Scotland previously introduced a cap of 4.99x income per application, in what was seen as an acknowledgment of the dangers of out of control BTL lending.

The move was isolated, however, as Santander, Virgin Money, the Coventry Building Society and the Yorkshire Building Society all confirmed that they have no plans to follow suit.