Sorry for interrupting, this website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Learn more
Accept & Close

Buy-to-let - UK - March 2009

The buy-to-let mortgage market is a little over a decade old. In that time it has galvanised the UK rental market, fostering significant increases in the availability and quality of rented accommodation. What was once a market in the hands of companies, institutions and specialist investors has increasingly shifted to one controlled by individual landlords. The buy-to-let sector has ridden the wave of the UK housing market. The UK’s love affair with owning bricks and the easy (too easy) availability of finance have made the returns from property investment attractive to individual investors.

But 2007 was a significant watershed for the buy-to-let market and the UK housing market generally. Since Q3 2007, the finance tap has been turned off from the housing market, leading to sharp falls in house prices. Fortunately, experienced landlords take a long-term view of the return on their investments, so despite declining capital gains, many are sticking with the market judging that growth will return in 2009 or 2010. However, there remains uncertainty as to when recovery will set in and the rapid increase in the supply of rental properties is now forcing rent levels down across the UK.


Key themes:
  • In 2008, there was an explosion in the number of landlords in the UK, largely resulting from a rapid rise in reluctant landlords. What will this mean for the BTL market and can it be sustained?
  • Given the current credit crunch, are individuals and landlords in particular still looking for opportunities in the market? More importantly, can landlords ride out the current storm?
  • The wholesale funding market has dried up, so how have the major players in the market coped and what impact has the crunch and nationalisation of major financial institutions had on the BTL market?
  • In 2008, innovation and new product development has been a low priority. Does this mean future innovation could be limited?

What you get

What's included

Why buy from us?

Succeed

Our reports will provide you with market data, consumer research and competitive intelligence to succeed in your market.

Instant Access

Buy now and you'll have instant access to the information you need to make the right decisions.

Opportunities

Find out what's next in the markets that matter to you: where opportunities lie and what challenges you will face.

Trusted

A business Superbrand, Mintel is a source you can trust. We have been defining and refining the Market Intelligence mix since 1972.

Table of contents

  1. Issues in the Market

      • Key issues
        • Market definitions
          • Abbreviations
          • Future Opportunities

            • Being unexciting
              • You must also get the message and customer service right
                • But boring does not mean doing nothing
                  • Renting a lifestyle option?
                    • The long-term prospects look good
                      • Think of the cross-sell opportunities
                      • Market in Brief

                        • The market shifts down sharply
                          • Figure 1: Number and value of buy-to-let sales, 1999-2008
                        • Supply beginning to exceed demand for rental properties
                          • Reluctant landlords are the most vulnerable in the short term
                            • The risk profile to worsen
                              • Figure 2: The percentage of BTL mortgages in arrears of three months or more, 1999-2008
                            • Landlords make informed judgements
                              • Figure 3: Property investor typologies – landlords v non-landlords, January 2009
                            • A good opportunity to pick up a bargain
                              • Lenders retrench and innovation dries up
                                • Lloyds Banking Group the new market leader
                                  • Figure 4: Market share of the leading buy-to-let providers, by amounts outstanding, mid-2008
                                • Heavy reliance on intermediaries
                                  • Buy-to-let advertising activity follows the market down
                                    • Improvement needed in advertising
                                      • Attitudes towards property investment remain largely positive
                                        • Key targets for the BTL market
                                          • Figure 5: The BTL consumer typologies and their attitudes towards a BTL investment, January 2009
                                      • Broader Market Environment

                                        • Key points
                                          • Looks like trouble ahead
                                            • Figure 6: The quarter-on-quarter growth of real GDP, Q1 2003-Q4 2008
                                          • Unemployment: Every cloud has a silver lining
                                            • Figure 7: The level of unemployment in the UK (All: Aged 16+) seasonally adjusted, 2006-08
                                          • Will renting help limit the rise in unemployment?
                                            • Figure 8: Household characteristics in England: Recently moved households, by current and previous tenure, 2006/07
                                          • Severe pressure on mortgage lenders
                                            • Mortgage rates coming down…
                                              • Figure 9: UK Inter-bank, three-month rate+ and selected UK bank rates*, January 2001-December 2008
                                            • …as banks respond by narrowing their margins, whilst…
                                              • Figure 10: How BTL lending spreads changed+, Q2 2007-Q1 2009
                                            • …mortgage lenders don’t know which way to turn
                                              • Demographic trends should boost rental sector
                                                • A strong rise in demand for rented flats
                                                  • Figure 11: The breakdown of households in England, by tenure and household type, 2007
                                                • Greater social segmentation
                                                  • More local hotspots
                                                    • Figure 12: The 20 areas of England predicted to see the fastest growth in household numbers, 2001-11
                                                  • Hotspots around universities
                                                    • Implications and opportunities
                                                      • Migration trends: is the tide turning?
                                                        • Figure 13: Approved applicants for the Worker Registration Scheme+, Q1 2005-Q3 2008
                                                      • Space in the rented sector
                                                        • Technologically – Improving the flow of information
                                                        • Internal Market Environment

                                                          • Key points
                                                            • Has the love affair with home ownership ended?
                                                              • Figure 14: Tenure structure of dwellings (index of number of dwellings, 1991=100), 1991-2007
                                                            • Private renting no longer the Cinderella tenure
                                                              • Figure 15: Total number of UK private rented dwellings (million) and the share of all dwellings accounted for by private rentals (%), 1981-2007
                                                            • But is the BTL bubble beginning to deflate?
                                                              • Figure 16: Share of private rental dwelling being purchased with BTL mortgages, 1998-2008+
                                                            • House prices – capital gains are disappearing…
                                                              • Figure 17: Index of average mix-adjusted UK house prices (fed 2002=100), February 2002-November 2008
                                                              • Figure 18: The average value of rented houses and flats – all regions (£000), 2007 and 2008
                                                            • …and set to go on shrinking?
                                                              • Figure 19: The percentage annual change+ in the index of average mix-adjusted UK house prices, January 2006-March 2008
                                                              • Figure 20: The annual+ percentage change in the average value of rented houses and flats – all regions (£000), February-November 2008
                                                            • Regions outside the South East gain the most
                                                              • Figure 21: Index of house prices, by region, November 2008 (February 2002 = 100)
                                                            • All regions suffer but London and the South East the most
                                                              • Figure 22: The average value of rented houses (£000), by region, 2007 and 2008
                                                              • Figure 23: The average value of rented flats (£000), by region, 2007 and 2008
                                                            • Rental demand strengthens but rental returns dip…
                                                              • Figure 24: Rental returns (% yield) to landlords, Q3 2003-Q4 2008
                                                            • …but lower interest rates boost geared returns
                                                              • Figure 25: The annual rate of return on BTL (geared investment and cash purchase), Q1 2006-Q4 2008
                                                            • The risk profile of BTL worsens sharply
                                                              • Figure 26: Buy-to-let mortgage arrears, maximum LTV and minimum rental cover, 1999-2008
                                                            • Fraud also an issue
                                                              • Implications and opportunities
                                                                • Profile of residential investment landlords: who are they
                                                                  • The average landlord is almost 50
                                                                    • Figure 27: Key landlord demographics, average of three quarterly surveys, March 2008, August 2008 and October 2008
                                                                  • Increasing regulation is a cause for concern for landlords
                                                                    • Tenancy Deposit Scheme
                                                                        • Figure 28: Tenancy deposit schemes joined by landlords, September 2008
                                                                      • Plan for enforced self-regulation
                                                                        • The Carsberg Report
                                                                          • Law Commission Report
                                                                          • Competitive Context

                                                                            • Key points
                                                                              • Buy-to-let property competes in the asset market
                                                                                • Figure 29: Sources of passive income, 2006/07
                                                                              • Greater competition in the property investment market
                                                                                • Nowhere to turn?
                                                                                  • BTL still generates good income returns compared to competitors…
                                                                                    • Figure 30: Rental yield on houses compared with the return on bank deposits and the dividend yield on stocks and shares, Q3 2006-Q3 2008
                                                                                  • …and proved more resilient than the stock market for capital appreciation
                                                                                    • Figure 31: Capital return on property and equity, Q3 2003-Q3 2008
                                                                                • Strengths and Weaknesses

                                                                                    • Figure 32: Buy-to-let mortgage market – strengths and weaknesses, 2009
                                                                                • Who’s Innovating?

                                                                                  • Key points
                                                                                    • A market living on its past reputation?
                                                                                      • Key innovations in the past few years go into reverse
                                                                                        • Figure 33: Changes in market conditions, 2006-08
                                                                                        • Figure 34: The Number of BTL mortgages available, August 2007-January 2009
                                                                                      • Low-rate/fixed-rate deals available, but watch those fees
                                                                                      • Trade Perspective

                                                                                          • About the participating organisations
                                                                                            • Late 2009 and 2010 will see the crunch over
                                                                                              • The crunch will not have a lasting impact on the market
                                                                                                • Accidental or reluctant landlords will only have a temporary impact
                                                                                                  • Portfolio acquisition possible, an interesting idea but only on the right terms
                                                                                                    • Some NPD on the horizon
                                                                                                    • Market Size and Forecast

                                                                                                      • Key points
                                                                                                        • Demand for BTL finance falls
                                                                                                          • Figure 35: How demand for BTL changed+, Q2 2007-Q1 2009
                                                                                                        • Landlords bunker down in the storm
                                                                                                          • Figure 36: How landlords are acting over their net investment in residential property (% of landlords), Q4 2004-Q4 2008
                                                                                                        • Amounts outstanding continue to grow…
                                                                                                          • Figure 37: Number and value of buy-to-let mortgages outstanding, 1999-2008 (year-end)
                                                                                                        • …but new business levels are well down
                                                                                                          • Implications and opportunities
                                                                                                            • Remortgaging drives the market in 2008
                                                                                                              • Figure 38: The breakdown (%) of buy-to-let gross advances (value), by type of mortgage, 2002-08
                                                                                                            • Forecast
                                                                                                              • Figure 39: Forecast of the value and volume of new buy-to-let sales, 2003-13
                                                                                                            • Factors used in the forecast
                                                                                                            • Market Share

                                                                                                              • Key points
                                                                                                                • A market in transition
                                                                                                                  • Figure 40: Ten largest buy-to-let lenders, by the number of products on the market, January 2009
                                                                                                                • A new market leader
                                                                                                                  • Figure 41: Market share of the leading buy-to-let lender groups, by amounts outstanding, mid-2007 and mid-2008
                                                                                                                  • Figure 42: Market share of the leading buy-to-let providers, by amounts outstanding, mid-2008
                                                                                                              • Companies and Products

                                                                                                                • Key points
                                                                                                                  • Major reduction in capacity
                                                                                                                    • Fixed deals the norm
                                                                                                                      • Figure 43: Structure of BTL mortgages, January 2009
                                                                                                                    • APR related to period
                                                                                                                      • Figure 44: The APR charged on BTL mortgages, January 2009
                                                                                                                    • Arrangement fees vary significantly
                                                                                                                      • Figure 45: Quoted arrangement fees on a £120,000 BTL mortgage, by type of mortgage, January 2009
                                                                                                                    • Arrangement fee related to period mortgage runs
                                                                                                                      • Figure 46: Quoted arrangement fees on a £120,000 BTL mortgage, by period of mortgage, January 2009
                                                                                                                    • Fees and maximum LTVs on the up
                                                                                                                      • Figure 47: Trends on arrangement fees and maximum LTVs in secured lending, Q2 2007-Q1 2009
                                                                                                                      • Figure 48: The percentage of mortgage products on the market, by LTV (%), January 2008 and January 2009
                                                                                                                    • Little product differentiation
                                                                                                                      • Figure 49: The three main types of BTL mortgages available, January 2009
                                                                                                                    • Mini profiles of the largest buy-to-let lenders
                                                                                                                      • The Lloyds Banking Group
                                                                                                                        • Bradford & Bingley (Mortgage Express)
                                                                                                                          • Paragon Mortgages
                                                                                                                            • The Mortgage Works (Nationwide Specialist Lending)
                                                                                                                              • Bank of Ireland
                                                                                                                                • Northern Rock
                                                                                                                                  • Capital Home Loans
                                                                                                                                  • Brand Communication and Promotion

                                                                                                                                    • Key points
                                                                                                                                      • Mortgage adspend follows the market down
                                                                                                                                        • Buy-to-let rollercoaster
                                                                                                                                          • Figure 50: Buy-to-let mortgage adspend (£000) and share of the mortgage adspend taken by buy-to-let, year to November 2004-08
                                                                                                                                        • Buy-to-let providers focus their adspend on the press
                                                                                                                                          • Implications and opportunities
                                                                                                                                            • C&G the heaviest investor
                                                                                                                                              • Figure 51: The 25 largest investors in buy-to-let mortgage advertising, by advertiser, year to November 2004-08
                                                                                                                                          • Channels to Market

                                                                                                                                            • Key points
                                                                                                                                              • The intermediary the prime channel to market
                                                                                                                                                • Figure 52: Distribution channels used by leading buy-to-let lenders, 2009
                                                                                                                                            • The Consumer – Property Ownership and Aspirations

                                                                                                                                              • Key points
                                                                                                                                                • Survey background
                                                                                                                                                  • Being a landlord is a niche activity
                                                                                                                                                      • Figure 53: Property ownership and intentions to buy, January 2009
                                                                                                                                                    • Big rise in rental supply
                                                                                                                                                        • Figure 54: The number of landlords, 2006-09
                                                                                                                                                      • Implications and opportunities
                                                                                                                                                        • Landlords tend to be affluent family adults
                                                                                                                                                          • Figure 55: The ownership and intention to own a UK rental property by socio-economic group, lifestage, household income and ACORN group, January 2009
                                                                                                                                                          • Figure 56: The ownership of a UK rental property, by Mintel’s Special Group, January 2009
                                                                                                                                                        • It’s a middle-aged thing
                                                                                                                                                          • Figure 57: The ownership of a UK rental property, by age and age by socio-economic group, January 2009
                                                                                                                                                        • But like policemen, are landlords getting younger?
                                                                                                                                                          • Figure 58: The ownership of a UK rental property and intention to buy, by age and age by socio-economic group, January 2009
                                                                                                                                                        • Implications and opportunities
                                                                                                                                                          • Digital media and broadsheets hit the mark
                                                                                                                                                            • Figure 59: The ownership of a UK rental property and intention to buy, by technology usage, internet frequency, web use and newspaper readership, January 2009
                                                                                                                                                          • Implications and opportunities
                                                                                                                                                          • The Consumer – Impact of the Crunch

                                                                                                                                                            • Key points
                                                                                                                                                              • House prices expected to continue to fall
                                                                                                                                                                  • Figure 60: Attitudes towards property prices in the next couple of years, January 2009
                                                                                                                                                                • Landlords more pessimistic than other adults
                                                                                                                                                                    • Figure 61: Attitudes towards property prices in the next couple of years – landlords v non-landlords, January 2009
                                                                                                                                                                  • Affluent adults more pessimistic
                                                                                                                                                                    • Figure 62: Attitudes towards property prices: average score, by gender, age, socio-economic group, household income and ACORN group, January 2009
                                                                                                                                                                    • Figure 63: Attitudes towards property prices: average score+, by Mintel’s Special Group and age by socio-economic group, January 2009
                                                                                                                                                                  • But landlords still see property as a good investment
                                                                                                                                                                      • Figure 64: Attitudes towards property Investment – landlords v non-landlords, January 2009
                                                                                                                                                                    • Implications and opportunities
                                                                                                                                                                      • But raising finance could be an issue
                                                                                                                                                                        • Figure 65: Attitudes towards mortgage finance – landlords v non-landlords, January 2009
                                                                                                                                                                      • Mortgage lenders need to rebuild bridges
                                                                                                                                                                        • Figure 66: Attitudes towards mortgage lenders – landlords v non-landlords, January 2009
                                                                                                                                                                      • Implications and opportunities
                                                                                                                                                                        • Property investor typologies
                                                                                                                                                                          • Figure 67: Consumer property typologies, January 2009
                                                                                                                                                                          • Figure 68: Consumer views on property investment, by property typologies, January 2009
                                                                                                                                                                        • Landlords are Calculators
                                                                                                                                                                          • Figure 69: Property investor typologies – landlords v non-landlords, January 2009
                                                                                                                                                                      • The Consumer – Consumer Targets

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Four in ten landlords thinking about profiting from falling prices
                                                                                                                                                                              • Figure 70: Consumer atttudes to a BTL investment – landlords v non-landlords, January 2009
                                                                                                                                                                            • Mature adults the least interested in BTL
                                                                                                                                                                              • Figure 71: Adults unlikely to invest in BTL properties, by gender, age, socio-economic group and ACORN group, January 2009
                                                                                                                                                                            • BTL investor typologies
                                                                                                                                                                                • Figure 72: The seven BTL investment clusters, January 2009
                                                                                                                                                                              • Active investor and experts the key target groups
                                                                                                                                                                                • Figure 73: Details of the seven BTL investment clusters, January 2009
                                                                                                                                                                                • Figure 74: Attitudes towards BTL investment, by the main BTL investment clusters, January 2009
                                                                                                                                                                              • Landlords are Raring to go
                                                                                                                                                                                • Figure 75: BTL investment clusters – landlords v non-landlords, January 2009
                                                                                                                                                                              • Implications and opportunities
                                                                                                                                                                                • Being Anti-BTL does not mean being anti-property
                                                                                                                                                                                  • Figure 76: Attitudes towards property investment, by the main BTL investment clusters, January 2009
                                                                                                                                                                                • The affluent are Raring to go…
                                                                                                                                                                                  • Figure 77: The main BTL investment clusters, by socio-economic group, ACORN group and household income, January 2009
                                                                                                                                                                                • …the mid-income want to wait
                                                                                                                                                                                  • Implications and opportunities
                                                                                                                                                                                    • Dreamers may lack the confidence to realise their dreams
                                                                                                                                                                                      • Anti-BTLs lack the income
                                                                                                                                                                                        • 25-54-year-old couples want to get going
                                                                                                                                                                                          • Figure 78: The main BTL investment clusters, by gender, age, lifestage and marital status, January 2009
                                                                                                                                                                                        • The young singles can only dream
                                                                                                                                                                                          • Oldest adults are not interested
                                                                                                                                                                                            • South Easterners want to act, while Northerners can only dream
                                                                                                                                                                                              • Figure 79: The main BTL investment clusters, by TV region, January 2009
                                                                                                                                                                                            • Digital media and the broadsheets are powerful marketing channels
                                                                                                                                                                                              • Figure 80: The main BTL investment clusters, by technology used and newspaper readership, January 2009
                                                                                                                                                                                            • Intermediaries are key
                                                                                                                                                                                                • Figure 81: The main sources of finance advice, by BTL investment clusters, January 2009
                                                                                                                                                                                              • Implications and opportunities
                                                                                                                                                                                                • Word of mouth and viral marketing work
                                                                                                                                                                                                  • Saying no with a smile on your face

                                                                                                                                                                                                  Companies Covered

                                                                                                                                                                                                  • Abbey
                                                                                                                                                                                                  • Association of Residential Letting Agents
                                                                                                                                                                                                  • Bank of England
                                                                                                                                                                                                  • Bank of Ireland
                                                                                                                                                                                                  • Barclays Bank plc
                                                                                                                                                                                                  • Bradford & Bingley plc
                                                                                                                                                                                                  • Bristol & West
                                                                                                                                                                                                  • Britannia Building Society
                                                                                                                                                                                                  • British Bankers' Association (BBA)
                                                                                                                                                                                                  • Capital Home Loans
                                                                                                                                                                                                  • Cheltenham & Gloucester plc
                                                                                                                                                                                                  • Citizens Advice Bureau
                                                                                                                                                                                                  • Clydesdale Bank
                                                                                                                                                                                                  • Council of Mortgage Lenders
                                                                                                                                                                                                  • Earl Shilton Building Society
                                                                                                                                                                                                  • Financial Services Authority (The)
                                                                                                                                                                                                  • Gfk NOP
                                                                                                                                                                                                  • GMAC-RFC
                                                                                                                                                                                                  • HBOS plc (Halifax Bank of Scotland)
                                                                                                                                                                                                  • Landlord Mortgages
                                                                                                                                                                                                  • Lloyds Banking Group
                                                                                                                                                                                                  • Mortgage Express
                                                                                                                                                                                                  • National Counties Building Society
                                                                                                                                                                                                  • Nationwide Building Society
                                                                                                                                                                                                  • Northern Rock plc
                                                                                                                                                                                                  • Norwich & Peterborough Building Society
                                                                                                                                                                                                  • Nottingham Building Society
                                                                                                                                                                                                  • Office for National Statistics
                                                                                                                                                                                                  • Paragon Mortgages
                                                                                                                                                                                                  • Pink Home Loans
                                                                                                                                                                                                  • Royal Bank of Scotland Group plc
                                                                                                                                                                                                  • Standard Life Bank Limited
                                                                                                                                                                                                  • The Paragon Group of Companies PLC
                                                                                                                                                                                                  • The Royal Institution of Chartered Surveyors
                                                                                                                                                                                                  • UCB Home Loans

                                                                                                                                                                                                  Buy-to-let - UK - March 2009

                                                                                                                                                                                                  US $2,648.76 (Excl.Tax)