Buy to let lending falls for the first time in two years

Landlord demand for buy to let mortgages has fallen for the first time in two years, according to the Bank of England. The information was disclosed in the Bank’s quarterly credit survey for the first three month’s of the year. Overall, banks and building societies expect little change in lending levels or interest rates over the next three months - but predict the buy to let fall is temporary and borrowing will rise later in the year. Market commentators put forward the stamp duty holiday for first time buyers as one reason for the drop. They argue first time buyers are purchasing homes targetted by landlords in a bid to beat the tax break deadline which expires at the end of March (2012). In separate research, one in five buy to let landlords told buy to let lender Paragon Mortgages that they expect to buy more homes in the next quarter. However, just over half (51%) of landlords were finding problems in sourcing investment finance, while only a 33% felt buy to let mortgages were generally available. “This very much reflects the current market position, we are starting to see more buy-to-let products and the emergence of more small to mid-scale lenders, but the market still has some way to go before we return to more ‘normal’ conditions,” said Paragon chief executive Nigel Terrington The lender issues a quarterly survey tracking buy to let trends. Landlords are optimistic about their letting businesses, reporting few vacancies and climbing average gross yields of 6.2%. Almost all landlords (97%) expect demand to stay the same or increase over the next 12 months. Strong demand is cutting void times, which reduced from an average 2.9 weeks to 2.6 weeks. “The findings are interesting and show that it has been a positive start to 2012. Landlords are optimistic about the year ahead and are planning to invest in their portfolios,” said Terrington. “Despite some reports suggesting tenant demand may be falling, landlords are still experiencing decreasing void periods, so the appetite for quality, private rented housing is still very much there.”

Landlord blog

Siobhan Smith

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