Introducer Today

Buy to Let

Sally Laker

Managing Director, Mortgage Intelligence

The financial cold that the US has so kindly passed on to the rest of the world is not going to disappear on the back of a couple of Beecham powders.

Certainly listening to many of the seminars given at the Adviser Glasgow event recently, the general view is that we will be coughing and spluttering for quite some time to come. There is no doubt that this is the most likely scenario, but just as those who have forecast a return to normality in a couple of months are wide of the mark, so too are those predicting a complete meltdown. In the first instance we have to look at the volumes that have been traded in the mortgage market over recent years.

The galloping house prices and insatiable desire that buyers were showing could not have lasted forever and they have delivered some of the best trading conditions lenders and intermediaries have ever enjoyed. That the heat is now coming out of the market should give everyone else a chance to catch up and while borrowers at the edges will have difficulty in finding new lines of credit when their existing deal comes to an end, we are still in a position to serve the vast majority of borrowers.

Looking specifically at the buy-to-let (BTL) market, the numbers we have seen over the last decade defy belief and the latest set of data from the Council of Mortgage Lenders (CML) shows that the sector has held up well, despite the coven of doubters who have forecast its demise over recent months. It is true that developers have overshot demand by some considerable distance in certain areas with the number of two bedroom flats they have built, but this on its own in not enough to write off the entire BTL market.

Indeed the figures from the CML show that the BTL sector held up very well during the fourth quarter of last year and over the year the total number of  mortgages taken out increased by over 30 000. Average minimal rental cover has fallen to 120% and while this may stop some investors, it will also help protect those who do get into the market.

Professional landlords are not likely to simply up sticks and get out because securing finance has become more difficult. The underlying demand for rented accommodation in the UK remains very strong and every indication is that it will continue to grow. Even for the so called amateur investor, there is still a need to diversify their portfolio of investments and few will be keen to have everything in equities when there is so much uncertainty over their current and indeed future performance.

What we are likely to see is investors taking a lot more care in where they buy a property and at long last the message that real research is needed seems to be getting through. Global financial markets are likely to be unwell for quite some time yet, and for some raising finance may be difficult, but for those who can, well researched BTL property remains an excellent investment.