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BTL Mortgages - UK - April 2017

“The buy-to-let market has been rocked by rule changes in the last two years, with little opportunity to adapt before the next change takes place. It will be some time before the market can settle and lenders can bring a fresh approach to the challenges presented by tighter controls. Remortgages represent a key competitive ground, particularly for the growing number of ‘accidental landlords’ and those looking to maximise earnings as a retirement strategy.”
– Patrick Ross, Senior Financial Services Analyst

This Report discusses the following key topics:

  • The rise of ‘accidental’ landlords is distorting demand for buy-to-let mortgages
  • 45-54-year-olds could be open to buy-to-let for retirement income

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Table of contents

  1. Overview

    • What you need to know
    • Executive Summary

        • The market
          • Growth in buy-to-let lending is expected to continue slowing
            • Figure 1: Forecast of new buy-to-let mortgage advances – Fan chart, 2011-21
          • Buy-to-let lending swings further in favour of remortgages
            • Figure 2: Breakdown of buy-to-let house purchase and remortgage lending, £m, 2011-16
          • Companies and brands
            • Lloyds Banking Group remains clear market leader
              • Many lenders have become cautious on buy-to-let
                • The consumer
                  • 7% of people own at least one rental property
                    • Figure 3: Ownership of rental property, February 2017
                  • Almost half of landlords own at least one property outright
                    • Figure 4: Landlords’ funding methods for rental property(ies), February 2017
                  • Rise in accidental landlords muddies the traditional buy-to-let process
                    • Figure 5: Original reasons for buying additional properties, February 2017
                  • More than half of landlords have no plans for their property in the next year
                    • Figure 6: Landlords’ rental property intentions, February 2017
                  • One in 10 are interested in becoming landlords
                    • Figure 7: Interest in buying a rental property among non-landlords, February 2017
                  • Two thirds say affordability prevents them from considering buy-to-let
                    • Figure 8: Barriers to rental property ownership, February 2017
                  • Many think rental property is a good way to ensure a comfortable retirement
                    • Figure 9: Attitudes towards buy-to-let, February 2017
                  • What we think
                  • Issues and Insights

                    • The rise of ‘accidental’ landlords is distorting demand for buy-to-let mortgages
                      • The facts
                        • The implications
                          • 45-54-year-olds could be open to buy-to-let for retirement income
                            • The facts
                              • The implications
                              • The Market – What You Need to Know

                                • Regulatory changes have redefined the terms of the market
                                  • Buy-to-let lending growth slowed significantly in 2016
                                    • Remortgages lead property purchases in uncertain climate
                                      • Trends towards renting and urbanisation support buy-to-let
                                      • Market Size and Forecast

                                        • Growth in buy-to-let lending slowed in 2016
                                          • Figure 10: Total value of buy-to-let gross lending per year, 2007-16
                                          • Figure 11: Volume and value of new buy-to-let mortgages, 2007-16
                                        • Government changes are to put a dampener on future growth
                                          • Figure 12: Forecast of new buy-to-let mortgage advances – Fan chart, 2011-21
                                          • Figure 13: Forecast of new buy-to-let mortgage advances, at current and constant prices, 2011-21
                                        • Forecast methodology
                                        • Market Segmentation

                                          • Buy-to-let lending swings further in favour of remortgages
                                            • Figure 14: New buy-to-let mortgages, by purpose of loan, not seasonally adjusted, 2011-16*
                                            • Figure 15: Breakdown of buy-to-let house purchase and remortgage lending, £m, 2011-16
                                        • Regulatory and Legislative Changes

                                          • Stamp Duty Land Tax increase implemented in April 2016
                                            • Figure 16: Stamp Duty Land Tax, residential and additional property rates, from April 2016
                                          • First phase of buy-to-let tax relief restrictions due to begin in April 2017
                                            • Figure 17: Schedule of changes to tax relief available to landlords, 2017/18-2020/21
                                          • Buy-to-let lenders subject to intervention by the PRA and FPC
                                            • EU Mortgage Credit Directive rules unlikely to be impacted by Brexit
                                              • Impact of no wear-and-tear allowance felt in 2016/17 tax bill
                                                • Letting agents to be banned from charging fees to tenants
                                                • Market Drivers

                                                  • Buy-to-let is supported by a strong trend towards renting
                                                    • Figure 18: UK housing stock, by tenure, 2009-16
                                                  • New housing supply is still falling short, despite improvements
                                                    • Figure 19: Quarterly number of permanent dwellings completed, by tenure – UK, Q1 2007-Q2 2016
                                                  • The cost of renting privately has grown consistently
                                                    • Figure 20: Index of private housing rental prices, January 2011-December 2016
                                                  • Confidence in buy-to-let investing has diminished
                                                    • Figure 21: Demand for buy-to-let and prime lending, by quarter, 2012-16
                                                  • Intermediaries will continue to dominate as investors seek more support
                                                  • Companies and Brands – What You Need to Know

                                                    • Lloyds Banking Group remains clear market leader
                                                      • Many lenders have become cautious on buy-to-let
                                                      • Market Share

                                                        • Market leader Lloyds Banking Group loses little ground to peers
                                                          • Figure 22: Buy-to-let amounts outstanding – Selected lenders only, 2014-16
                                                      • Competitive Strategies

                                                          • Retail banks cautious in the face of rule changes…
                                                            • Birmingham Midshires (Lloyds Banking Group)
                                                              • NatWest (RBS Group)
                                                                • Nationwide, via The Mortgage Works
                                                                  • …but challengers may take the opportunity to step up
                                                                    • Landbay
                                                                      • Retention proc fees build reputation for fairness among intermediaries
                                                                        • Coventry Building Society
                                                                          • Aldermore Building Society
                                                                            • Skipton Building Society
                                                                              • Nationwide
                                                                              • The Consumer – What You Need to Know

                                                                                • 7% of people own at least one rental property
                                                                                  • Almost half of landlords own at least one property outright
                                                                                    • Rise in accidental landlords muddies the traditional buy-to-let process
                                                                                      • More than half of landlords have no plans for their property in the next year
                                                                                        • 11% are interested in becoming landlords
                                                                                          • Two thirds say affordability prevents them from considering buy-to-let
                                                                                            • Rental property as a retirement income is an attractive option
                                                                                            • Rental Property Ownership

                                                                                              • 7% of people own at least one rental property
                                                                                                • Figure 23: Ownership of rental property, February 2017
                                                                                              • Males are more likely to own rental property while younger…
                                                                                                • …and females are more likely as they approach retirement
                                                                                                  • Figure 24: Ownership of at least one rental property, by age and gender, February 2017
                                                                                                • Two in five of the self-employed own at least one rental property
                                                                                                  • Figure 25: Ownership of at least one rental property, by employment status, February 2017
                                                                                              • Landlords’ Property Funding Methods

                                                                                                • Almost half of landlords own at least one property outright
                                                                                                  • Figure 26: Landlords’ funding methods for rental property(ies), February 2017
                                                                                              • Landlords – By Accident or by Design?

                                                                                                • Rise in accidental landlords muddies the traditional buy-to-let process
                                                                                                  • Figure 27: Original reasons for buying additional properties, February 2017
                                                                                              • What Will Landlords Do Next?

                                                                                                • More than half have no plans for their property in the next year
                                                                                                  • Figure 28: Landlords’ rental property intentions, February 2017
                                                                                              • Non-landlords’ Interest in Rental Property

                                                                                                • One in 10 are interested in becoming landlords
                                                                                                    • Figure 29: Interest in buying a rental property among non-landlords, February 2017
                                                                                                  • Interest in rental property strongest among Millennials
                                                                                                    • Figure 30: Non-landlords with any interest in buying a rental property, by gender and age, February 2017
                                                                                                  • There is a regional gap between interest and ownership
                                                                                                    • Figure 31: Rental property, ownership vs interest, by region, February 2017
                                                                                                • Non-landlords’ Barriers to Rental Property Ownership

                                                                                                  • Two thirds say affordability prevents them from considering buy-to-let
                                                                                                    • Figure 32: Barriers to rental property ownership, February 2017
                                                                                                    • Figure 33: Number of barriers to rental property ownership, February 2017
                                                                                                  • As people become older, wiser and wealthier, they see buy-to-let as more of a hassle
                                                                                                    • Figure 34: Barriers to rental property ownership, by age, February 2017
                                                                                                  • Generation Rent recognises that buy-to-let is unrealistic (for now)
                                                                                                    • Figure 35: Barriers to rental property ownership, by living situation, February 2017
                                                                                                • Attitudes towards Buy-to-Let

                                                                                                  • Many think rental property is a good way to ensure a comfortable retirement
                                                                                                    • One in four landlords expect the sector to be worse off over the next two years
                                                                                                      • Figure 36: Attitudes towards buy-to-let, February 2017
                                                                                                  • Appendix – Data Sources, Abbreviations and Supporting Information

                                                                                                      • Abbreviations
                                                                                                        • Consumer research methodology
                                                                                                        • Appendix – Market Size and Forecast

                                                                                                            • Figure 37: Best- and worst-case forecast for buy-to-let mortgage advances, 2016-21
                                                                                                          • Forecast Methodology

                                                                                                          Companies Covered

                                                                                                          To learn more about the companies covered in this report please contact us.

                                                                                                          BTL Mortgages - UK - April 2017

                                                                                                          US $2,478.79 (Excl.Tax)