Landlords shrug off stricter mortgage rules to expand portfolios

16th May 2014

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The introduction of stricter mortgage rules is not dampening the appetite for buy-to-let, with 60% of landlords planning on expanding their portfolio of properties in the next six months.

Mortgage broker Mortgages for Business has predicted an expansion in the buy-to-let market during the rest of the year as one in six landlords plans to buy another property and 45% of landlords look to remortgage.

With property prices rising, buy-to-let is considered an increasingly lucrative investment and landlords are seeing opportunities in areas outside of ‘vanilla’ residential property.

While 82% of those landlords who plan to expand will consider buying a standard residential buy-to-let property, 29% were considering multiple occupation properties, and 15% were thinking of buying semi-commercial property.

Landlords purchasing more property are keen to take advantage of rock-bottom mortgage rates as are the 45% of landlords remortgaging in the next three to six months, who want to secure cheap funding before interest rates start to creep up next year – with a preference for five-year fixed deals.

David Whittaker, managing director of Mortgage for Business, said: ‘With buy-to-let mortgage rates at historic lows, this strategy may well prove prudent in protecting [landlords] against future interest rate rises.’

He added that landlords not looking to remortgage must be keen to ‘hang onto their existing reversion rates’ – the rate which a mortgage reverts to at the end of its term.

This positive outlook in the buy-to-let market is reflected in a drop in the number of landlords who believe lenders are not doing enough to help them. A total of 58% of landlords believe lenders should be doing more to support property investors, down from 68% in October last year.

The encouraging figures are despite the introduction of the ‘mortgage market review’ (MMR), which has introduced tougher affordability rules for mortgages in a bid to prevent borrowers from over-burdening themselves with debt.

The expansion also comes amid a backlash against landlords and the private rental sector by young professionals, who have been termed ‘Generation Rent’ for their inability to afford property of their own.

They have led Labour leader Ed Miliband to pledge a ‘fairer deal’ for tenants if he is voted into power that will include an upper limit on rent rises based on average market rates and longer secured tenancies that will not leave tenants vulnerable to eviction. The party also wants unnecessary charges levied on tenants to secure a property or renew their contract to be axed.

‘Generation Rent is a generation that has been left ignored for too long…Nine million people are living in rented homes today – over a million families. They need a fairer deal,’ said Miliband.

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