Why now is the time to get into buy to let, urges Ying Tan, managing director of The Buy to Let Business.
This April, the UK mortgage market will face its biggest shake up since it was regulated back in 2004.
Since 2009 the industry regulator has conducted an assessment of the market, in an attempt to deliver a ‘sustainable market’ in the wake of the credit crunch.
And on April 26, a new set of rules, devised from findings of this Mortgage Market Review, will come into effect.
Prospective buyers will face stringent affordability checks and stress testing to ensure not only can they afford a mortgage now, but that they will still be able to pay when rates start to rise. As a result, getting a residential mortgage will become much more difficult.
But while getting a residential mortgage will get tougher, getting a buy to let mortgage may well become much easier. Why? Well, it’s all down to annual targets.
All mortgage lenders have lending targets they must hit on a yearly basis. As lenders get to grips with the new processes they must follow and systems they must have in place to comply with MMR rules, it’s likely that they will cut back on their residential lending. And, in an attempt to avoid a failure to meet their targets, it’s almost guaranteed that they’ll turn to buy to let to cover the shortfall.
Buy to let makes commercial sense for lenders. The returns are actually better than those for residential mortgages and the arrears level just as strong. This and the fact that they are unregulated and therefore exempt from any MMR rules means they’re an attractive option.
For buyers of course, it’s not just the fact that buy-to-let funding will be easier to obtain that should act as a draw. Indeed, the general economics of buy to let makes sense – such as interest rates on savings remaining at historic lows.
And the fact that buy-to-let rates are as low as they are makes it an even more attractive proposition.
They say in property it’s all about timing, and the time may never be as good to get involved in buy-to-let.