Buy-to-let market continues to thrive

The report noted that the rental market has continued to grow strongly in recent months, supporting continued steady growth in buy-to-let activity.

Gross lending for BTL purposes was £27.4bn in 2014. Over the past five years the share of total BTL lending in overall mortgage lending has picked up to 15% in 2014 Q4, higher than in the pre-crisis period.

Gross buy-to-let advances for remortgaging have also increased in recent years – this as a share of the total grew from 32% in 2002 to 52% in 2014, with the share of gross advances for house purchase at 45%.

David Whittaker, managing director of Mortgages for Business, said: “Buy-to-let is not subject to the nerves and jitters of this spring’s homeowner mortgage market.

“Election uncertainty might be putting some people off buying a home but in the meantime millions of tenants still need somewhere to live – and landlords are investing in new properties, as buy-to-let mortgage rates reach new lows.

“Underpinning this, rents are picking up on the back of a strengthening jobs market, supporting yields – while steady price growth is still providing an additional bonus of capital growth to many landlords.

“There are uncertainties on the horizon, and the latest noises from the Bank of England indicate how the powers-that-be seem as unsure about the future path of interest rates as the man on the street.

“However, when rates do rise or if the economic recovery does slow, landlords will be in a better position to stand up to headwinds than a year ago – as their tenants’ financial health improves.”

The Bank of England figures were released at the same time as new research showing rents across England and Wales are now 15.2% higher than at the time of the last General Election in May 2010. This is according to the latest Buy-to-Let Index from Your Move and Reeds Rains.

Over the same period since May 2010, consumer price inflation has amounted to 11.6%. This leaves a 3.6% increase in rents after the effects of inflation – or the equivalent of a 0.7% real terms increase each year over the last Parliament.

Most recently, average rents stood at £768 per month in March 2015. Annual rent rises have accelerated to the fastest pace in two years, with the average rent across England & Wales now up 3.7% over the past twelve months.

Between February and March 2015, rents have risen by 0.3% on a monthly basis. This is slightly slower than the 0.4% month-on-month uplift seen between January and February, but is the second month of rental growth in a row after November, December and January all saw rents lower on a monthly basis, as is often the case in the winter months.

After the latest rises, rents are now just £2 away from the all-time record high of £770 per month set in October 2014.

Adrian Gill, director of estate agents Reeds Rains and Your Move, said: “Since 2010 the private rented sector has absorbed over a million extra households. With social housing in decline, alongside a parallel decay in the number of people owning their own home with a mortgage, private renting has stood in to fill the gap.

“With only small real-terms rent rises, this has generally been a success – and tenants are now half as likely to fall behind on rent as at the peak of the financial crisis. However, this sector is carrying the weight of the housing crisis – and that will mean faster rent rises in future if supply doesn’t keep up. Without more homes every year to match a rising population, housing will inevitably become more expensive. And with one in five households now renting privately, this section of the population won’t be an exception to those fundamentals.

“Over the next five years politicians of all stripes can’t just hope that this problem will go away – Britain needs more homes, and over the long term. Investment by landlords will only provide places to live as quickly as those homes are given planning permission and completed.”