To all Mortgage Strategy readers with zero interest in buy-to-let, I’m not going to dress this up – you’ll be doing a bit of skimming of this issue.
Buy-to-let has always dominated the market’s attention, and newspaper headlines, far more than its overall share of total mortgage lending would suggest. This week is no exception.
But if we turned the clocks forward a year, would the market still be talking so much about buy-to-let?
It is clear that buy-to-let is a market in slow decline. Last year the sector racked up £40bn of lending, but revised forecasts from the Council of Mortgage Lenders suggest this will fall to £33bn by 2018.
This is no reflection of the underlying health of the buy-to-let market. More than 36 lenders play in the sector, with more than 1,200 products available. But regulatory and tax changes have chipped away at the class.
It is unlikely these changes will be undone any time soon. The chancellor’s attention will be on matters such as Brexit; HMRC is notoriously reluctant to unwind tax policy; and the Bank of England has had buy-to-let in its crosshairs for some time.
Indeed, some say the slow contraction of buy-to-let is exactly what the Bank wants. It has been vocal in the past on the fact that it sees buy-to-let as ‘systemically’ risky, and so a steady stream of buy-to-let landlords selling up is a win for the Bank on three fronts. Not only would this dial down any systemic risk but it would do so in a way that did not cause property market panic and tanking house prices. Landlords selling homes would also free up housing stock, which in theory would aid first-time buyers.
And with new-build houses being built at snail-like speed, it is unlikely the Bank will do anything imminently to change the new status quo.
So it is easy to assume incumbent buy-to-let players would be glum about the future. But I have detected relatively little negativity. Instead the market is showing impressive willingness to get on with business and to diversify where necessary.
Buy-to-let will always be a big market. But if I was a betting man I’d say this time next year some of the market attention currently focused on it will swap to other areas that are currently niche but have a definite buzz about them: new-build, HMOs, holiday lets and semi-commercial, to name a few.