The ten year anniversity of the buy to let mortgage
This summer marks the Tenth anniversary of the buy-to-let mortgage. In July 1996 Mortgage
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Express (part of the Bradford & Bingley group) were the first to trial a dedicated buy-to-let mortgage product, and currently has a market share of approximately 20 per cent.
Relaxation of criteria reflects the realisation that buy-to-let is not as risky as lenders first thought. There are now around 70 lenders offering the buy-to-let product ( life insurance quotes ) however albeit that around 50 per cent of all buy to let loans are written by the 6 members of the ARLA panel:Paragon, GMAC, Mortgage Express, Birmingham Midshires, NatWest and The Mortgage Business.
A risk analysis of buy-to-let versus residential shows residential loans have a higher risk profile. Latest figures from the Council of Mortgage Lenders showed that 0.68 per cent of buy-to-let mortgages had been in arrears for more than three months, compared with 0.97 per cent of normal loans.
High house prices and a growing population have meant that more people are now renting for longer, fuelling the demand for rental property. Amateur and novice landlords alike who have enjoyed success after dipping their toe into the water with one or two properties now have the confidence to further increase their portfolios.
Over the past decade the sector has enjoyed exceptional growth, to now represent approx. 8 per cent of total housing stock in the UK. The first mortgage deals were inflexible, commercial style products with high interest rates, up to 4 per cent over Bank of England base rate, and low loan to values up to a maximum of 75 per cent. Historically, rental cover had to equal 130 per cent of the mortgage to protect both the lender and the landlord ( life assurance ) against voids and the higher risk.