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BTL Mortgages - UK - April 2017

Published By :

Mintel

Published Date : Apr 2017

Category :

Insurance

No. of Pages : N/A

The buy-to-let market has been rocked by rule changes in the last two years, with little opportunity to adapt before the next change takes place. It will be some time before the market can settle and lenders can bring a fresh approach to the challenges presented by tighter controls. Remortgages represent a key competitive ground, particularly for the growing number of ‘accidental landlords’ and those looking to maximise earnings as a retirement strategy.

Table of Content

OVERVIEW
What you need to know

EXECUTIVE SUMMARY
The market
Growth in buy-to-let lending is expected to continue slowing
Figure 1: Forecast of new buy-to-let mortgage advances – Fan chart, 2011-21
Buy-to-let lending swings further in favour of remortgages
Figure 2: Breakdown of buy-to-let house purchase and remortgage lending, £m, 2011-16
Companies and brands
Lloyds Banking Group remains clear market leader
Many lenders have become cautious on buy-to-let
The consumer
7% of people own at least one rental property
Figure 3: Ownership of rental property, February 2017
Almost half of landlords own at least one property outright
Figure 4: Landlords’ funding methods for rental property(ies), February 2017
Rise in accidental landlords muddies the traditional buy-to-let process
Figure 5: Original reasons for buying additional properties, February 2017
More than half of landlords have no plans for their property in the next year
Figure 6: Landlords’ rental property intentions, February 2017
One in 10 are interested in becoming landlords
Figure 7: Interest in buying a rental property among non-landlords, February 2017
Two thirds say affordability prevents them from considering buy-to-let
Figure 8: Barriers to rental property ownership, February 2017
Many think rental property is a good way to ensure a comfortable retirement
Figure 9: Attitudes towards buy-to-let, February 2017
What we think

ISSUES AND INSIGHTS
The rise of ‘accidental’ landlords is distorting demand for buy-to-let mortgages
The facts
The implications
45-54-year-olds could be open to buy-to-let for retirement income
The facts
The implications

THE MARKET – WHAT YOU NEED TO KNOW
Regulatory changes have redefined the terms of the market
Buy-to-let lending growth slowed significantly in 2016
Remortgages lead property purchases in uncertain climate
Trends towards renting and urbanisation support buy-to-let

MARKET SIZE AND FORECAST
Growth in buy-to-let lending slowed in 2016
Figure 10: Total value of buy-to-let gross lending per year, 2007-16
Figure 11: Volume and value of new buy-to-let mortgages, 2007-16
Government changes are to put a dampener on future growth
Figure 12: Forecast of new buy-to-let mortgage advances – Fan chart, 2011-21
Figure 13: Forecast of new buy-to-let mortgage advances, at current and constant prices, 2011-21
Forecast methodology

MARKET SEGMENTATION
Buy-to-let lending swings further in favour of remortgages
Figure 14: New buy-to-let mortgages, by purpose of loan, not seasonally adjusted, 2011-16*
Figure 15: Breakdown of buy-to-let house purchase and remortgage lending, £m, 2011-16

REGULATORY AND LEGISLATIVE CHANGES
Stamp Duty Land Tax increase implemented in April 2016
Figure 16: Stamp Duty Land Tax, residential and additional property rates, from April 2016
First phase of buy-to-let tax relief restrictions due to begin in April 2017
Figure 17: Schedule of changes to tax relief available to landlords, 2017/18-2020/21
Buy-to-let lenders subject to intervention by the PRA and FPC
EU Mortgage Credit Directive rules unlikely to be impacted by Brexit
Impact of no wear-and-tear allowance felt in 2016/17 tax bill
Letting agents to be banned from charging fees to tenants

MARKET DRIVERS
Buy-to-let is supported by a strong trend towards renting
Figure 18: UK housing stock, by tenure, 2009-16
New housing supply is still falling short, despite improvements
Figure 19: Quarterly number of permanent dwellings completed, by tenure – UK, Q1 2007-Q2 2016
The cost of renting privately has grown consistently
Figure 20: Index of private housing rental prices, January 2011-December 2016
Confidence in buy-to-let investing has diminished
Figure 21: Demand for buy-to-let and prime lending, by quarter, 2012-16
Intermediaries will continue to dominate as investors seek more support

COMPANIES AND BRANDS – WHAT YOU NEED TO KNOW
Lloyds Banking Group remains clear market leader
Many lenders have become cautious on buy-to-let

MARKET SHARE
Market leader Lloyds Banking Group loses little ground to peers
Figure 22: Buy-to-let amounts outstanding – Selected lenders only, 2014-16

COMPETITIVE STRATEGIES
Retail banks cautious in the face of rule changes…
Birmingham Midshires (Lloyds Banking Group)
NatWest (RBS Group)
Nationwide, via The Mortgage Works
but challengers may take the opportunity to step up
Landbay
Retention proc fees build reputation for fairness among intermediaries
Coventry Building Society
Aldermore Building Society
Skipton Building Society
Nationwide

THE CONSUMER – WHAT YOU NEED TO KNOW
7% of people own at least one rental property
Almost half of landlords own at least one property outright
Rise in accidental landlords muddies the traditional buy-to-let process
More than half of landlords have no plans for their property in the next year
11% are interested in becoming landlords
Two thirds say affordability prevents them from considering buy-to-let
Rental property as a retirement income is an attractive option

RENTAL PROPERTY OWNERSHIP
7% of people own at least one rental property
Figure 23: Ownership of rental property, February 2017
Males are more likely to own rental property while younger…
and females are more likely as they approach retirement
Figure 24: Ownership of at least one rental property, by age and gender, February 2017
Two in five of the self-employed own at least one rental property
Figure 25: Ownership of at least one rental property, by employment status, February 2017

LANDLORDS’ PROPERTY FUNDING METHODS
Almost half of landlords own at least one property outright
Figure 26: Landlords’ funding methods for rental property(ies), February 2017

LANDLORDS – BY ACCIDENT OR BY DESIGN?
Rise in accidental landlords muddies the traditional buy-to-let process
Figure 27: Original reasons for buying additional properties, February 2017

WHAT WILL LANDLORDS DO NEXT?
More than half have no plans for their property in the next year
Figure 28: Landlords’ rental property intentions, February 2017

NON-LANDLORDS’ INTEREST IN RENTAL PROPERTY
One in 10 are interested in becoming landlords
Figure 29: Interest in buying a rental property among non-landlords, February 2017
Interest in rental property strongest among Millennials
Figure 30: Non-landlords with any interest in buying a rental property, by gender and age, February 2017
There is a regional gap between interest and ownership
Figure 31: Rental property, ownership vs interest, by region, February 2017

NON-LANDLORDS’ BARRIERS TO RENTAL PROPERTY OWNERSHIP
Two thirds say affordability prevents them from considering buy-to-let
Figure 32: Barriers to rental property ownership, February 2017
Figure 33: Number of barriers to rental property ownership, February 2017
As people become older, wiser and wealthier, they see buy-to-let as more of a hassle
Figure 34: Barriers to rental property ownership, by age, February 2017
Generation Rent recognises that buy-to-let is unrealistic (for now)
Figure 35: Barriers to rental property ownership, by living situation, February 2017

ATTITUDES TOWARDS BUY-TO-LET
Many think rental property is a good way to ensure a comfortable retirement
One in four landlords expect the sector to be worse off over the next two years
Figure 36: Attitudes towards buy-to-let, February 2017

APPENDIX – DATA SOURCES, ABBREVIATIONS AND SUPPORTING INFORMATION
Abbreviations
Consumer research methodology

APPENDIX – MARKET SIZE AND FORECAST
Figure 37: Best- and worst-case forecast for buy-to-let mortgage advances, 2016-21
Forecast Methodology

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