New research suggests that tougher lending criteria and rising house prices are having an impact on buy to let borrowing in the UK, but not all investors are put off by the changes.
Average buy to let loans and deposits increased in 2016 as a result of rising property prices and the tougher stance by lenders on criteria and rental calculations, according to the research from the Mortgage Broker, a nationwide firm specialising in landlords and property investors.
Landlords borrowed an average of £15,000 more to purchase property in 2016 compared with the previous year, with the average loan increasing in 2016 to £185,188 from £170,268 in 2015.
The average loan to value dropped from 61.6% in 2015 to 59.7% in 2016 and the average deposit rose by 18.5% from £105,605 in 2015 to £125,016 in 2016.
The research also shows that landlords and investors paid an average of 12.7% more for their properties year on year, with the average property price sitting at £310,265 in 2016, compared with £275,286 in 2016.
‘Landlords are certainly feeling the pinch but the raft of tax changes that came into force in 2016 do not appear to have dampened the buy to let market. In many towns and cities, landlords have increased their investment in buy to let property, despite the financial challenges that have been recently thrown at them by the Government,’ said Darren Pescod, managing director of The Mortgage Broker.
‘Our research shows that landlords are finding larger deposits and increasing their borrowing to secure property. With mortgage interest rates so low and the demand for rental property booming, the market still provides a great investment opportunity,’ he pointed out.
He explains that although the stamp duty additional levy and income tax changes that come into force in this tax year have slowed down this sector in terms of the number of applicants applying for new buy to let mortgages, it has not put everyone off.
‘This may lead to some consolidation with larger landlords, scooping up rental opportunities in their local area and beyond. Our view is that smaller landlords with fewer than three properties may find it financially tough and will pull out of the market,’ said Pescod.