How quickly the buy-to-let market has veered from celebrity to notoriety. For many, the very phrase is synonymous with the wider woes of the housing market.
But the reality is more complex. Our analysis indicates buy-to-let mortgages have played an important but not dominant role in the growth of the private rental sector. What is more, increased lending in this sector since the recession has come from a very low base. Similarly, there is minimal research to suggest buy-to-let lending contributes to inflated house prices.
The Bank of England is monitoring activity with intent, leaving lenders and borrowers to fret that a clampdown is just around the corner. But let us be positive: with careful handling, the extra scrutiny may support a rational appraisal of buy-to-let’s growing role and the need for a healthy private rental sector.
Clearly, buy-to-let has become a more significant part of the bigger picture but that does not mean it should automatically be resisted on principle. Time will tell what impact changes to tax relief will have on landlords’ behaviour and we must hope they do not translate into higher rents or reduced supply. The expanded private rented sector has been crucial in providing homes otherwise unavailable in social and owner-occupied sectors.
Responsible lending to responsible landlords is nothing to fear. Driving people, including investors, away from the market will only ever be a short-term fix to reducing the pressures created by the persistent shortage of homes.