Buy-to-let boom to push house prices up as landlords take advantage of low rates
09-16-2015
Landlords are leading the charge in Britain’s resurgent housing market, snapping up properties while interest rates are still low
To Let signs
Landlords are responsible for an increasing share of demand in Britain's housing market Photo: GETTY
By Tim Wallace
Landlords are surging into the housing market, with buy-to-let mortgage numbers growing at more than four times the pace of first-time buyer mortgages.
July saw banks and building societies give out £1.6bn of loans to landlords buying properties, up 33pc on the same month of 2014, according to the Council of Mortgage Lenders (CML).
By contrast first-time buyers borrowed £4.6bn in the month, up 7pc on the year. And home owners moving to a new property took out a further £7.6bn in home loans, up 10pc on the year.
The rush to grab buy-to-let properties is likely to put up house prices, as it will reduce supply.
The only sector growing faster than new buy-to-let lending was remortgages, as existing home owners and landlords rushed to lock in a new deal before interest rates go up – a change that is expected to take place in the next 12 months.
Owner-occupiers took out £5.1bn in remortgage deals, up 34pc on the year, while existing landlords swapped current loans for new deals amounting to £2.2bn – up 69pc on the same period of 2015.
After a rocky period before the general election, when some buyers feared extra taxes or limits to rent under Ed Miliband’s Labour Party would harm the returns on their investment, the sector has taken off in recent months.
In July 2014, 9,300 buy-to-let loans were given out. This July a total of 11,800 landlords borrowed to buy a property.
The rise in purchases is in part caused by the relatively healthy state of the economy, according to the CML's director general Paul Smee.
“We expect house prices to rise 7pc in 2015 and then by 6pc in 2016"
Howard Archer, IHS Global Insight
“The market has shown steady growth in house purchase and buy-to-let over the past few months with general improvements in economic factors across the UK allowing for more people to enter the property market," he said.
"This positive direction of travel going into the autumn months reinforces our recent revised forecasts that lending levels should continue to grow gradually over the rest of the year after a subdued beginning.”
Economist Howard Archer from IHS Global Insight said the lending numbers indicate house prices would accelerate in the coming months.
“We expect house prices to rise 7pc in 2015 and then by 6pc in 2016. A significant upside risk to these forecasts is currently coming from the shortage of houses on the market,” he said.
“Nevertheless, the upside for housing market activity and prices is expected to be constrained by more stretched house prices to earnings ratios, tighter checking of prospective mortgage borrowers by lenders and the likelihood that interest rates will soon start rising gradually.”