With the continuing difficulties in the mortgage market in general and specifically with regards to first-time buyers, it is looking increasingly likely that 2012 will be the year of buy-to-let.
Mortgage lenders are actively targeting this sector of the market and are expecting to massively increase their lending volumes here in 2012.
Whilst all aspects of the market have been hit by both the credit crunch and the general constraints on funding, the residential mortgage market has also been hit by huge increases in regulation and a massive tightening of criteria that has been imposed on them by the FSA which has, as yet, not affected the buy-to-let market.
With buy-to-let interest-only loans continuing to be available right up to 80% or even 85% loan to value, in stark contrast to residential, where this is capped at 75%, this is a clear advantage for the rental sector.
Another major advantage is the continuing availability of non-income verified products in the buy-to-let market. These have not been available for over two years in the residential sector since the demise of self-cert, but continue unabated in the buy-to-let market.
All of this has combined to ensure that lenders see buy-to-let as a major growth market and are focusing lots of their lending energies in this direction in preference to the residential market.
There are now six lenders out there who are offering 80% LTV buy-to-let mortgages, which is a complete transformation from even 12 months ago, and HSBC and Barclays are both offering 75% LTV buy-to-let mortgages for the new-build market, which has been unheard of since early 2008.
The long-term impact of this will likely be a further growth in the buy-to-let property market and a reduction in the number of owner occupiers in the UK housing market. This is slightly contrary to the supposed aims of the Coalition Government, but may be no bad thing overall anyway, especially when you consider that some of the most successful countries in Europe (ie Germany, Netherlands etc) have very low rates of home ownership, whereas some of the most problematic right now (Ireland, Italy, Spain) have very high rates.
Conor Murphy is Managing Director of Capricorn Financial
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