Figures published by UK Finance this week (October 15) showed the number of purchases using buy-to-let mortgages had risen every month, except one anomaly in June, for the past seven months.
In August this year 5,900 borrowers purchased a rental property with a buy-to-let mortgage, almost a quarter (23 per cent) more than the 4,800 who did the same in February.
The figures also showed the value of new buy-to-let mortgage lending had increased from about £6bn in February to £8bn in August.
It’s a buyer’s market. People think they can get hold of property for a good price — both house and mortgage — and many still see buy-to-let investing as a pension planDaniel White, director at Champion Hall & WhiteThe buy-to-let market grew rapidly after the financial crisis but has since taken a beating as a number of tax and regulatory changes have hit landlords’ pockets.
The changes led many to predict the buy-to-let market would shrink in size leaving only ‘professional landlords’ able to make viable returns, and many buy-to-let investors did leave the market earlier this year.
In April, the number of buy-to-let properties up for sale increased by 25 per cent and UK Finance figures for March showed the number of buy-to-let purchases dropped by 9.1 per cent year-on-year.
But today’s figures suggest the number of new landlords buying property or former landlords expanding their portfolio is on the up again.
Nick Morrey, product technical manager at John Charcol, said the latest rise could be down to the fact landlords were “getting to grips” with the fact buying properties through limited companies was “the way forward”.
He added: “The landlords that were going to leave the market have left, and those that are left have moved into the limited company space and have realised they can borrow what they need in a tax efficient way.”
Due to the shake up to mortgage interest rate relief, limited company status is more attractive to landlords as they can offset mortgage interest against profits which are subject to corporation tax instead of income tax rates, which is cheaper.
Dan White, director at Champion Hall & White, thought the upward trend was primarily down to “low product prices” — low mortgage rates — and low house prices.
He said: “It’s a buyer’s market. People think they can get hold of property for a good price — both house and mortgage — and many still see buy-to-let investing as a pension plan.”
Director of The Money Group, Martin Stewart, agreed, adding that transactions had plummeted over the past two years so it was “inevitable” they would bounce back.
He also thought the market was seeing a polarisation where the “dinner party landlords” were leaving market opportunities behind for more serious minded professional landlords.
The buy-to-let remortgage market has been steady over the past seven months, fluctuating between 15,000 and 12,500 remortgages each month.
Adrian Moloney, sales director at OneSavings Bank, said: “Buy-to-let activity is heading in the right direction. However, it’s still too early to say this is a trend with any meaning.
“Yet, with uncertainty pervasive in the market and the crackdown on taxation still having repercussions for landlords’ profits, this is encouraging news and highlights the resilience of the market."
imogen.tew@ft.com
