Paul Adams: Future lies with choice and opportunity

Paul Adams: Future lies with choice and opportunity

Paul Adams is sales director at Pepper Money

Few areas of the market attracts quite as much commentary as buy-to-let, possibly because of the sheer volume or regulatory and taxation changes that have been placed upon the sector in recent years.

It is clear, however, that while there are now more considerations for people to think about when investing in rental property, these still pale into relative insignificance when set against the fundamentals behind an investment in buy-to-let.

The primary factor behind the strength of buy-to-let is the growth of the Private Rented Sector and the ongoing demand for rental property.

The Private Rented Sector now accounts for around 20% of all households in the UK, with an increase of 2.5 million rental homes since 2000, according to a report by Seven Capital.

Consequently, privately rented property sits comfortably as the second biggest tenure in the UK housing market and looks set to rise thanks to a combination of more young people choosing rented accommodation over home ownership and growth amongst older tenants.

Seven Capital says a record 1.13 million-over 50s are now renting from landlords, which is up from just 651,000 a decade ago. It adds that, by 2021, one in four people will be looking to rent and, over the next four years, the number of households in privately rented accommodation is expected to grow to 5.79 million.

To help them meet this demand from tenants, landlords have access to a growing number of product options.

According to the latest buy-to-let Mortgage Index from Mortgages for Business, in Q3 2019 there were 49 lenders active in the buy-to-let market, offering more than 1,900 products – an increase of around 10% on the previous quarter.These growing options also take account of how landlords want to structure their investment for tax purposes.


Following changes to the treatment of mortgage interest tax relief and the surcharge on Stamp Duty, tax is now a much bigger consideration for all landlords and a key part of the advice process should be to recommend that your clients speak to a specialist property tax expert.

If you do not already have a working relationship or a referral arrangement with a tax expert, this is something that could be beneficial for your business and your clients.

One way that many landlords have chosen to manage their tax liability is by holding their investment in a limited company and this is another area where the mortgage options are growing.

Mortgages for Business says there were 31 lenders offering limited company buy-to-let in Q3 2019 and we know that this number has since increased to at least 32, as Pepper Money recently launched into the limited company buy-to-let market, taking our flexible and hands-on approach to underwriting to this sector.

all circumstances

The variety of mortgages available to buy-to-let landlords also mean that there are options for landlords with a different range of circumstances from first-time buyers to portfolio landlords, through to investors who have recent experience of adverse credit.

Pepper Money recently conducted some research amongst more than 4,000 adults in conjunction with YouGov.

The research found that 15% of respondents, or 7.86 million people, based on current population estimates, have experienced credit problems, including missed payments, CCJs, defaults, unsecured arrears and secured arrears, in the last three years.

Of these, 5% of people are thinking about purchasing a buy-to-let property to rent out in the next 12 months. This means there could potentially be nearly 400,000 landlords with recent credit problems who are looking for a buy-to-let mortgage.

You might find this statistic surprising, but there are so many ways for people to slip up on their credit, particularly if they are landlords with multiple linked addresses. So, it is not unreasonable that many landlords might be looking to invest even if they don’t have a completely clean credit record.


The diverse range of buy-to-let mortgages available means that there are plenty of options available for these landlords, whether they are looking to buy in their own name or choose to hold their investment in a limited company.

The future of buy-to-let will always attract speculation, but as long as the market is built on strong foundations of tenant demand, there will be appetite from landlords who see the sector as a long-term investment.

The competitive nature of the mortgage market will ensure that there are plenty of lending options to meet the needs of these landlords, and so it looks as though the future of buy-to-let will continue to offer choice and opportunity.