the power hour
mBe 2011 Power Hour: Betting on buy-to-let
Buy-to-let has been identified as a corner of the market with slightly better prospects. Social demographics make a compelling argument for buy-to-let investors and lenders can make reasonable margins. Our panel discuss the issues
With the market still tiny compared to its past height, What are realistic prospects for buy-to-let? Alex Hammond: Well the market is tiny across the board so it’s not just a buy-to-let issue. If you look at the markets lenders are expanding into, buy-to-let is a good one because it offers a good level of risk and at a superior margin. Looking at new lenders and intermediary only lenders which can’t compete on the high street, they aim for people who don’t fit in automated credit scores like the self- employed, complex prime and buy-to-let. These are areas where applications can’t fit straight into a machine. I think you’ll see an increase in activity over the year but it is against a difficult background in a difficult market. Yes it is small but it is blossoming in terms of the rest of the market which is also small. Greg Went: As a proportion of total mortgages outstanding, one in eight are
buy-to-let mortgages so in terms of proportional share, buy-to-let is actually looking quite healthy. Michael Clarke: Also considering where the market’s come from, what do we class as normal levels? Is 2007 normal for a year or is that froth? Andy Young: The key is that in 2007 the market was inundated with property speculators and that’s the area of the market which has now disappeared and is unlikely to return. So the key question is, what the natural size of the buy-to-let market for property investors is. We believe that’s somewhere in the region of £25bn to £30bn. This year is probably going to end up at £12bn to £13bn but that’s up on last year which was up on. That’s good news for mortgage brokers if there are reasonable levels now then just by maintaining natural market share then the potential is to double that. Nigel Stockton: Is that £25bn to £30bn going to show in the mortgage figures though? I think that half of it will go into commercial lending figures because I don’t think that mortgage lenders will ever go back to large portfolio lending; a lot of business will be done through commercial lenders and not be counted in the buy-to-let numbers. So if you’ve got a portfolio of 20 and above, it’s highly unlikely, with Paragon as a possible exception and Kensington probably not,
38 mortgage introducer OCTOBER 2011
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