On top of this, buy-to-let has become a favoured investment alternative to more traditional stock market investments and pensions. Pension funds have seen such losses in the recent past that people are opting for more secure and controllable options.
At the start of 2006 came the news that the government would not allow buy-to-let properties in self-invested personal pensions. But, as foreseen by professionals, this had relatively little effect on the buy-to-let market.
Landlords were challenged by several new regulations last year including Houses in Multiple Occupation legislation and the Local Housing Allowance.
The HMO rules are fairly complex in view of the fact that each local authority has different requirements, fees and forms. The intention is for local government to ensure that rental accommodation for multiple rentals is registered and complies with basic safety requirements.
And Local Housing Allowances (Department of Health and Social Security payments) are now paid directly to tenants. Those bearing the consequences of this are private landlords who let their properties to DHSS tenants. The full effect of this change is yet to be discovered.
In 2007, landlords will have to use an accredited deposit scheme to protect tenants from unscrupulous landlords wrongly withholding deposits.
Last year, rental coverage was reduced to an unprecedented 100% by several lenders which allowed higher loans and more mortgages to be completed. Moreover, true 90% LTV buy-to-let mortgages are now available and it is possible to get higher percentage loans with achievable rental requirements. Other moves in the market include enlarged aggregate loan sizes and a more positive approach to multiple lettings.
So 2007 is on course to be another strong year for the buy-to-let industry. Demand from tenants will remain high due to the continuing growth of European immigration, steady house prices and the fact that the stigma previously attached to renting as being a poor social alternative to buying no longer prevails.
More lenders will enter the market offering fresh and improved products to meet landlords’ requirements. This is good news for brokers planning to write buy-to-let mortgage business this year.