News Review: Buy-to-let
Industry confident on buy-to-let stability By Yuan Phoon
Buy-to-let lending has seen a stable rise throughout 2011, however the resilience of this growth for 2012 and beyond is under question given turbulent economic forecasts. Figures from the council
ofmortgage Lenders showed that the pick-up in buy-to- let lending that began in the second quarter continued in the
third.the number of new buy-to-let loans increased by 16% in the third quarter of 2011 to a total of 34,500 loans. Paul Smee, director general
of the cmL, said: “With tenant demand remaining strong in the rental sector, some existing buy-to- let landlords have been expanding their portfolios and the growth that returned to the sector in the preceding quarter has continued. “the recovery of buy-
to-let from its low point in 2009 has helped improve supply and choice in the rental
market.despite recent improvements, however, buy- to-let lending volumes are still only around one-third of their former peaks.”
Demand demand for
rental
accommodation soared this year as the barriers for first- time buyers
grew.the average age of first-time buyers is now 35, revealed research by Post officemortgages. Without the ability to pay
deposits, potential first-time buyers are looking to the private rental sector as an alternative.
Broker take at the mortgage Business
expo in London, James chidgey, senior manager corporate accounts at nationwide and
the
mortgage Works, said that buy-to-let was undergoing a stable climb even pointing out to brokers they should be doing a fifth of their business on buy-to-let. chidgey said: “i wouldn’t
want to give the impression that there is a boom, as the market is being held back by moderate to weak housing supply, but if you are not already doing 15-20% of your business in buy-to-let you are underperforming in that sector.” the stability of buy-to-
let growth was questioned repeatedly at mBe namely on the impact buy-to-let regulation would have. BiPar the european trade
body for intermediaries told delegates at mBe that the european Parliament was looking to extend the scope of the european mortgage directive to include buy-to- let mortgages. rebekka de nie, legal
why
adviser at BiPar, said that it was lobbying to grant member countries flexibility on the scope of european regulation applied to local markets. She said: “it is unknown european
the
commission is making these propositions. many do not understand local markets and the conflicts which their proposals will make.” ray Boulger, senior
technical director at London- based John charcol, said: “i’d be very interested to see the impact the eu mortgage directive will have on buy-to-
12 mortgage introducer DECEMBER 2011
let.as it is currently drafted, it would decimate the buy- to-let market. affordability will have to be calculated in a similar way and that will severely restrict borrowing capacity.”
No worries Butdavid Finlay, intermediary channel director at Barclays, said that brokers need not worry if buy-to-let was to become regulated as most brokers already treated buy- to-let in the same way they do regulated contracts. He said: “in terms of the
paperwork and advice given i don’t think there’ll be a huge change for brokers if we see buy-to-let regulated in the future. and i think regulation is coming whether we like it or not.” Paul Howard, head
of corporate accounts at nationwide and the mortgage Works, said: “the jury’s still out in europe but personally i think we will see buy-to-let regulated.”
Controversial view alan cleary, managing director at Precisemortgages, went a step further and said that buy-to-let regulation would be helpful. He said: “regulation
is about protecting the consumer and in buy-to-let and bridging there is still a consumer in the picture it just looks a bit different from the usual residential transaction. “it is unequal that someone
who owns their house is protected but next door someone who rents isn’t.” cleary did say that the regulation needed to be
proportionate and it would not impact on the volumes lenders lent, citing that wasn’t what happened in 2004 when regulation first came in. He added: “there also
wasn’t an increase in cost then to the end consumer so if you get the regulation right it doesn’t necessarily mean cost will go up or lending will drop.”
2012 and beyond confident in the resilience of buy-to-let, tmW forecasted that buy-to-let lending had the potential to grow to £20bn in the next two or three years, though chidgey said this level would be dependent on another large lender entering the market. Santander is at the
forefront of conversation about the next big lender to enter the buy-to-let space. it is thought the lender will launch into buy-to-let in march 2012 following rumours that it and servicing “glitches” delayed plans for a September launch. Lea Karasavvas, managing
director at Prolific mortgage Finance, said: “it is clear that volumes have increased significantly over the last few months. “From speaking to some
of the lenders at mBe, we will without a doubt see some big steps taken in the buy-to-let market early next year that will see the sector getting stronger and stronger. “the underlying problem
will remain which is a lack of stock but i see buy-to-lets being a much bigger part of a broker’s business.”
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