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Lending to property investors is set to rise by 25% to hit £25 billion by the end of next year, according to new research.

Nearly three out of five landlords expect to expand their portfolios over the next six months, according to forecasts by Mortgages for Business.

More than two-thirds of those looking to expand will need to refinance in order to do so

But two-thirds of landlords feel lenders could do more to help property investors.

At an estimated £20 billion, lending to buy-to-let investors is 135% this year higher than the trough in 2009 of £8.5 billion, but remains well below the 2007 peak of £45 billion.

Mortgages for Business also found that nearly three-fifths of landlords intend to expand their portfolios over the next six months.

Landlords with the most properties are the most likely to expand.

Encouragingly, only 7% of all landlords say they intend to shrink their portfolios over the next six months.

David Whittaker, managing director at Mortgages for Business, said: “Despite easing conditions for owner-occupiers and first-time buyers, the prevailing conditions mean the private rental sector remains a vital element of the housing mix.

"The growth in lending to property investors is proof of this and the intention of landlords to expand further demonstrates that demand for rental property shows little sign of waning.” 

Investment in vanilla residential buy-to-let property is the most popular property type among investors looking to expand in over the next six months with 84% of landlords intending to target these properties. 

Among the more complex property investment options, the most popular property types are houses in multiple occupation – 20% of investors intend to purchase HMOs, and multi-unit freehold blocks, with 14% intending to buy these property types. Fewer investors plan to buy semi-commercial property (11% and commercial property (9%).

Despite the sentiment towards expansion and the large proportion of landlords needing to refinance in order to do so, over two-thirds of property investors feel lenders could do more to support them.

By far the biggest challenge that landlords say they face from lenders is their lending criteria, 60% of investors feel lenders need to ease their criteria to support the market.

Investors would also like to see lenders remove non-property related income requirements, increase the LTV threshold, increase the number of products available at higher LTVs and reduce the amount of computer-based lending decisions.   

David Whittaker at Mortgages for Business said: “The appetite for expansion is large among property investors. Yields are strong, property prices are rising and demand from tenants shows little sign of slowing.

"As a result it’s poor that so many landlords feel lenders are not doing enough to help them. This will be emphasised even further if the Bank of England confirms that buy-to-let will be left out of the new slim-line Funding for Lending scheme.”


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