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Buy to Let remains strong

6th March 2008 | back to article listings BACK    print this article PRINT

Interesting news from the Council of Mortgage lenders. http://www.ft.com/cms/s/0/39891096-e4d8-11dc-a495-0000779fd2ac.html

Buy to let investors are not being put off by the scare stories of the property market and are taking advantage of their improved negotiating power. The Council of mortgage lenders confirmed today that buy to let lending shows little sign of slowing down based upon figures up until December 31, 2007 for the last quarter. Advancing 84,800 loans in the period was less than the 94,300 advanced at in the previous quarter but it was still up noticeably on the last quarter of 2006.

In addition, the CML confirmed buy to let landlords were getting better deals than home buyers and confirmed our house view from Autumn 2007 that landlords would not be leaving the market in droves as commentators have been hypothesising for some time.

Interestingly, due to buy to let landlords being a better credit risk than the average homeowner, interest cover calculations dropped in the period typically from 125% to 120%, and this probably reflects the fact that rents are rising strongly. We forecast that many buy to let lenders will permit experienced landlords to borrow on the basis of just 100% cover going forwards once the rental growth is taken on board by the lenders as a statement of fact rather than just initial data suggesting this is happening.

It is clear that we are not in the middle of a housing crash, with prices barely down 2% from the highest prices of 2007 and up over 5% year on year, and instead we are just seeing a confused period where well funded buyers are obtaining extremely good prices temporarily. All the indicators from the house price indices point to strength in average house prices and indeed there are some indications of the rate of house price growth recommencing in the spring as suggested by the recent Rightmove data showing a 3.2% gain in asking prices in just the month up to their February report. Rents are rising, house prices are firm but bargains can be had and interest rates are falling - it is no surprise buy to let landlords are confident and looking forward to some increasing rental profits over the next 24 months.

Stuart Law

This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.

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