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Buy to Let Mortgage Products Soar

by Alison Feemantle

Figures released by the Council of Mortgage Lenders (CML) this week reveal a huge spike in the number of Buy to Let Mortgages taken out in 2011 and although they have yet to reach the boom period of 2007, it’s clear that this is a major growth area for the mortgage industry as a whole.

The findings state that overall, the number of loans agreed leapt by 84,000 with the biggest rise appearing in the last three months of the year when 34,800 buy to let mortgages were agreed. Those figures for the final quarter of 2011 represent a significant increase from 26,300 in the same 2010 period.

By comparing these statistics with 2007, when over 93,000 loans were advanced, the rise is thereby put into some perspective but by the end of the year, this type of funding was worth around 13% of the overall market.

Paul Smee of the CML pointed to a number of factors that have contributed to the increase including a static housing market and an increase in demand for rental properties.

‘These figures do not suggest that buy-to-let is crowding out first-time buyers; more that it is performing a really important role within the overall housing market,’ Mr Smee said.

‘The benefits of the availability of good quality, private rented housing should not be overlooked, especially as there are many households which need the flexibility and mobility that the private rented sector is well-placed to provide.’

Industry experts are now predicting steady growth for an area that is something of a shining light among a depressed market. In addition, some commentators have linked the problems involved in finding first time buyer deals to the increase in buy to let mortgages.

‘The buy-to-let sector is one of the few beneficiaries of the current economic climate,’ said Jonathan Samuels of Dragonfly Property Finance.

‘Buy-to-let is being driven by the weakness of the economy and the continued caution of high street lenders at higher LTVs.

‘Consumers are wary about buying and lenders are wary about lending. The result is soaring demand for rental property, which is pushing yields ever higher’

Overall this may seem to be good news for everybody but there is a suggestion that those who are renting in the private sector may become trapped and at the mercy of greedy landlords. With first time buyer mortgages hard to obtain, rent increases may have to be endured.

Matt Hutchinson of concluded with a warning to landlords.

‘Landlords should weigh up the benefits of retaining reliable tenants against the short-term benefits of hiking rents to take advantage of a booming rental market,’ Mr Hutchinson said.

‘The last thing any landlord wants is rental void periods, and if that means holding off imposing rent rises on current tenants, or even dropping the rent a little, then in the longer term that may be a better course of action.’

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