View more on these topics

With tmw pulling out of new-builds and the u-turn on sipps is 2006 looking tough for buy-to-let?

Though TMW’s decision has sparked concern in the sector, buy-to-let’s prospects remain positive for next year, say our experts

At Mortgage Express, we are optimistic about the prospects for buy-to-let in 2006. Our 2005 Q3 customer confidence survey showed customers remained positive about buy-to-let’s future, and this has been borne out in the market during Q4.

The reduction in the base rate in August has been feeding through, with business volumes also supported by buoyant tenant demand. Some 37% of our customers were looking to increase their portfolios into 2006, and with interest rates set to remain low and demand remaining high, we expect them to do so.

Undoubtedly, recent announcements will not help the buy-to-let market, but conversely I see no reason why they should damage it. The government’s decision to prohibit residential property in self-invested personal pensions was a surprise, but is unlikely to cause any lasting problems. In the first place, the anticipated changes were never going to generate the large additional lending volumes that some commentators had predicted, and secondly, we expect buy-to-let to continue to be used as part of long-term retirement planning by many people.

In respect of new-build, The Mortgage Works’ decision reflects some concern about oversupply and the pricing of properties in this sector. However, market surveys over the past year – such as those compiled by the Royal Institution of Chartered Surveyors – have shown that tenant demand is increasing and that rental levels are rising. MEX continues to lend on new-build property. We are confident our underwriting processes will ensure that borrowers are adequately protected.

For example, we only lend on the value of a property after any incentives, such as cashbacks, have been deducted. We strive to ensure properties are not overvalued. If one mortgage product has taken the most flak over the last few years, it is buy-to-let. Apparently this sector is going to struggle in 2006. But I have heard it all before. Yes, The Mortgage Works is going to stop lending on new-build buy-to-let. So what?

I have also seen a lot of press comment about the U-turn on self-invested personal pensions, but this has been blown out of all proportion. The number of individuals in possession of a pension fund large enough to acquire property through a buy-to-let would have been few and far between. It was an initiative designed to help the rich get richer, so the government’s U-turn won’t affect the masses.

Buy-to-let will continue to be an important market for mortgage intermediaries. I have been saying for many years now that this sector has in-built stabilisers, which ensure it is unaffected by any adverse economic or market conditions. In the good times, landlords will gain from strong capital growth, whereas if the market is suppressed, demand for rental properties increases as do rental yields.

The market outlook shows buy-to-let is not due to decline. Why? Because first-time buyers will continue to stay away from the market. With this market reducing in size, we have found a natural hedge with the increasing buy-to-let sector.

And because the number of first-time buyers will remain low, it means there are plenty of renters to contribute to a healthy buy-to-let market. Add to this an increase in immigrant numbers, student levels and changing work patterns, and demand for rental properties remains good.

Next year we will continue to see new landlords enter the market, attracted by the benefits that can be earned over the longer term. Moreover, the market will be kept alive by landlords looking to remortgage and add to their portfolios.


Mortgage lending rises by 5%

Gross mortgage lending rose by 5% to an estimated 28.5bn in November show the latest figures from the Council of Mortgage Lenders. This was the second highest monthly lending figure on record, 1% lower than the 28.9bn of lending in July 2004, and 30% more than the 21.7bn of lending last November.Lending activity usually slows […]

Don’t give up the proc fee fight for DA brokers

From John Malone In response to Tom Cleary’s letter (Mortgage Strategy December 5), I support his sentiment regarding the treatment of directly authorised brokers over an appointed representative of a principal in relation to proc fees. My views are well documented, not only in the boardrooms of major lenders, but in print. In fact, we […]

House prices will remain stable in 2006, says Propertyfinder predicts that interest rates and house prices will remain stable throughout 2006.Jim Buckle, managing director at, says: The dark days of late 2004 and early 2005 for the housing market are well and truly behind us. Propertyfinder.coms research tracking buyer and seller confidence is a good predictor of housing transaction volumes and shows […]

Mortgage Next expands business development management team

Mortgage Next Network has made several appointments to its team of business development managers. Julie Wilson, who joined the firm in April 2003 as regional sales manager for the South-East, has been made senior business development manager. Wilson has more than 16 years mortgage industry experience gained with NatWest, Western Trust, Alliance & Leicester and […]


News and expert analysis straight to your inbox

Sign up