Mortgage Trust releases 2004 buy-to-let outlook

“Despite gloomy predictions new buy to let lending in 2003 is expected to reach around £16bn. With the recent Mintel report stating that two in five adults would rather invest in property than traditional pensions it is obvious that faith in the stock market is still unrestored and property investment is a very popular alternative. With numbers of first time buyers at an all time low, and an ever increasing number of single person households tenant demand is likely to remain strong in 2004. With the additional expected government initiatives to combat the shortage of affordable housing also expected to bolster the private rental sector, we predict that the market will remain buoyant in 2004 and new lending figures will marginally outperform those of 2003.

With the double lure of rental yields and capital appreciation, buying property to let is seen by many as a lucrative investment. However we expect house price inflation to stabilise at high single figures and rental yields to stay stable, especially in the South, so investors are more likely to view property investment as part of a long-term personal finance plan than a ‘get rich quick’ scheme. Indeed recent research indicates 68% of Mortgage Trust landlords are planning to hold some sort of property portfolio for over 15 years. This trend will continue into 2004 with investors in the market becoming increasingly professional in their approach, and a stronger focus on existing landlords looking to expand their portfolios rather than new investors entering the sector.

The evolving demographics of investors will also mean that lenders will need to adapt to their changing needs and take a more flexible approach. Competition among lenders in the buy to let sector is likely to increase, and with interest rates rising, this is less likely to be price focused. As investors become more professional so too will lenders, and relationship driven service will be a key requirement of both investors and introducers. Lenders will need to concentrate on their ability to process each case as quickly and efficiently as possible and flexible initiatives such as Mortgage Trust’s agreed reserve fund, are likely to be in increased demand.

In terms of criteria we predict that maximum LTVs of most providers will remain at 85% in 2004 and the rental cover requirement will continue to hover around 130%.”