Buy to Let

Buy to Let lending has been shocked by the change to stamp duty from April and still has to recover. The bringing forward of purchases to beat the stamp duty deadline suppressed lending in the following months, but it seems likely that demand for buy to let loans will remain.

Low mortgage rates and resilient capital values in a world of short housing supply mean that the returns to housing are still respectable compared with other assets.

This along with comments by Andy Haldane, the Bank of England’s Chief Economist will not harm the desire to choose property as at least part of a pension plan. As with any market there are risks. The rise in the number of properties to let has led to some softening in rents as the balance between supply and demand has shifted.

London and the South East have seen the number of homes available to rent in August grow by 26% and 22%, respectively, compared with the same period last year. This is faster than their tenant demand which has grown by 8% in London and 3% in the South East. Rents are still rising in most parts of the country, but the pace has slowed significantly.

But in Central London and the South East there have been falls in rent of about 2%. Falling rents will make the sums more difficult to add up for landlords, but so too for mortgage lenders, especially in expensive areas.

The Financial Policy Committee has at last announced the response to its consultation, introducing more stringent underwriting requirements for buy to let lending.

Bank of England Policy Statement

Author: Fionnuala Earley - Countrywide's Chief Economist

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