Pension reforms to boost buy-to-let business

Despite recent evidence of a slow down in the growth of Buy-to-Let lending, 68.1% of respondents believe that they will write more business over the next 3 months than in the previous 3 months. Intermediaries are confident that professional landlords will continue to invest in Buy-to-Let, due in part to the pension reforms planned for April 2006. This will see the inclusion of residential property as a qualifying asset class in SIPPs which could in turn lead to an increase in residential property investment and potentially have a positive effect on house prices.

Chris Tonkin from ABC Buy-to-Let comments: “The outlook for strong business volumes is extremely promising. In particular we expect business to come in from professional investors who are positive about medium term growth in capital values following the April 2006 pension reforms. Add to this a steady growth in the number or re-mortgages and the opportunity for investors to secure good deals whilst there is still uncertainty in the owner-occupier market, and the story for Buy-to-Let lending looks very positive.”

This view is also reflected in the steady increase in number of those intermediaries who forecast that house prices will rise in the next three months, up from 22% in the January survey to 29.5% in this survey.

Brokers continue to expect that loans to existing landlords will form the bulk of their business (45.2%) but re-mortgaging remains a strong part of their targets, with brokers forecasting 37.5% of business coming from that sector. As favourable fixed-rate terms begin reaching their end, brokers may expect an influx of clients keen to re-mortgage back on to attractive deals.

Nicola Severn, Marketing Manager at Mortgage Trust added: ‘Our survey of Buy-to-Let intermediaries reveals that brokers remain optimistic about the sector over the next three months. This may be partially due to the Government’s decision to include residential property in SIPPs from April 2006, widening investment opportunities for the Buy-to-Let investor and potentially injecting a new momentum into the housing market. Although existing landlords will not be able to easily transfer their current properties into SIPPs, the prospect of capital gains in the medium term may prove to be an attractive boost to their portfolios. Brokers can also expect a rise in levels of re-mortgaging as favourable deals begin to come to the end of their terms. These factors are certain to have been considered by brokers, who continue to believe that the Buy-to-Let market will remain strong over the coming three months.”