View more on these topics

B2L to grow despite Govt crackdowns


The buy-to-let mortgage market will continue to grow despite a swathe of Government crackdowns on the sector, experts say.

Last week the Prudential Regulation Authority published a consultation paper proposing to strengthen buy-to-let underwriting standards by insisting on a minimum level of stress testing to ensure loans remain affordable when rates rise.

The Bank of England’s Financial Policy Committee is also expected to bring in new rules for buy-to-let underwriting soon.

In his July Budget, Chancellor George Osborne announced cuts to tax relief on buy-to-let homes in an move to even the playing field between would-be landlords and owner-occupiers.

From 2017, relief for buy-to-let landlords will be gradually cut to 20 per cent from the present 40 or 45 per cent.

In his 2015 Autumn Statement the Chancellor added a 3 percentage point surcharge to stamp duty for buy-to-let properties, starting from April.

Hometrack director of research Richard Donnell says the Government changes might temporarily  stifle demand but will not hobble the buy-to-let market in the long term.

He says: “Buy-to-let will remain the future of the housing market but all these changes will slow the rate of growth in lending.

“In terms of the home purchase side of buy-to-let, there will be a year or two of consolidation where potentially we will see volumes fall back a little bit.”

But Donnell says buy-to-let investors will continue to be drawn to the profitability of the sector.

“One of the strongest underpinning factors has been the fact that you can get a 5 or 6 per cent yield from a buy-to-let property.”


The Buy-to-Let Club managing director Ying Tan agrees buy-to-let will remain a safe haven for investors despite taking a beating from Government policy changes.

Tan describes the reforms as “one-dimensional” and says: “I understand why they want to put controls on buy-to-let but it’s just not proportionate. They have done too many things in too short a space of time.

“But what other investments are there that can give you a return on your money?

“The profitability on buy-to-let has certainly reduced, but it’s still more profitable than many other investment alternatives.”

Tan says the market will stabilise at around 5 per cent growth a year. “In five years’ time it will be steadily increasing. Possibly it will be flattish this year, then increases of 5 per cent year-on year after that.”

National Landlords Association head of policy Chris Norris also questions the logic of the Government’s buy-to-let crackdown.

He says policymakers see no middle ground between owner-occupation and renting and believe buy-to-let landlords must be penalised to promote homeownership. “There isn’t any room in their philosophy for both to coexist in any way.

“The single biggest damage we’ve seen to our sector is the Chancellor’s second Budget last year. That’s the change to the way mortgage interest will be treated for tax purposes, and the lack of relief that will be offered on that.”

Norris says the changes will force landlords to raise rents. “What is inevitable is you’ll have a lot of people still in the sector, but their costs will go up. So the charge to their customers is going to go up too.”

The PRA’s latest proposals will be good for the sector, he says. “We were relieved to see the form the underwriting standards took. The FPC could direct greater intervention, but what we’ve seen from the PRA is pretty sensible.”



Kensington raises B2L and FTB loan caps by £500k

Kensington Mortgages is increasing its maximum loan caps for first-time buyers and buy-to-let mortgages by £500,000. The lender has raised the maximum loan on buy-to-let mortgages to £1.5m from £1m. First time buyers will be able to borrow £1m, up from £500,000. Kensington head of sales and distribution Steve Griffiths says: “Whether it is for […]


Fitch: Government changes could harm B2L

The Government’s interventions in the buy-to-let market could eventually hurt the sector, according to Fitch Ratings. The rating agency says that tenant demand will keep the market strong over the next one to two years. But it adds that this could change over the medium term, especially if financial regulators bring in more rules around […]


New Street to sell B2L through MAB

New Street Mortgages has started selling its buy-to-let range through Mortgage Advice Bureau. All 800 MAB members now have access to the range. New Street entered the buy-to-let market in February this year with London & Country, John Charcol and the LSL mortgage networks Pink and First Complete. It then signed Legal & General Mortgage […]


‘Tough B2L underwriting rules needed to keep lenders in check’

Buy-to-let experts agree with the Prudential Regulation Authority that a minimum set of underwriting standards are needed to keep lenders in check. The proposals are laid out in a consultation paper on buy-to-let, published this morning. The paper includes suggestions for a minimum level of stress testing and new definitions and rules for portfolio landlords, […]

Trouble ahead - thumbnail

Pensions: trouble ahead?

The pace of change in the pension’s space has been little short of astonishing, and has left thousands of employers struggling to keep their pension policy compliant, and also on the right side of current best practice and governance. Many employers, and indeed many in the pensions industry itself, would like to see a period of no change during the next term of government. This would give all sides a chance to catch up and draw breath. 


News and expert analysis straight to your inbox

Sign up