From Robert Ulph on October 4, 2021
Last week saw the 25th anniversary of buy-to-let mortgage products and within the industry itself and beyond this is something to be celebrated.
Credit must be given to BTL mortgages for revamping what was a struggling private rented sector and growing it into the vital part of the country’s housing that it is today. BTL mortgages enabled more individuals to invest in property, resulting in billions of pounds to flow into the sector and as such the PRS saw growth and improvement that otherwise it would not have had. This meant better quality homes have been provided to the millions of people who privately rent across the country.
Over the past 25 years, the PRS has almost doubled in size, with nearly 13 million private renters in the UK and demand continuing to grow. According to figures released by Savills research, the UK PRS was worth £1.338 trillion in July 2021.
The need for BTL products was seen during the mid-90s, when homeowners, reluctant to sell as house prices were low, looked to rent out their home to facilitate a move. Mortgage agreements often prohibited homeowners from letting out their properties, so in 1996 the first BTL mortgage products specifically tailored to the PRS were introduced. This was spearheaded by the Association of Residential Landlords (ARLA – now Propertymark) working with a small group of lenders.
“It became clear that the mortgage options weren’t suitable,” said Robert Jordan, Former President ARLA Propertymark. “So together we designed a product, buy-to-let, that would enable more investors to purchase an investment property and let it. Paragon and NatWest were the first two mortgage lenders we approached.”
“Since being launched as a mortgage product specifically designed for landlords 25 years ago, buy-to-let finance has helped to transform the PRS,” commented Richard Rowntree, MD for Mortgages, Paragon. “The PRS is now a vital component of the UK’s housing provision, with renting no longer a last resort. The PRS is a tenure of choice as well as need and this is supported by the diversity of those who actively choose rented homes, benefitting from the flexibility they provide.”
So much is to be celebrated with the social change that BTL mortgages has brought about, and the much-needed homes that PRS landlords are delivering. But once again we question why the ever-changing and increasing legislation makes it so difficult for landlords to provide what is depended upon by so many people. Why since 2016 landlords have had to pay a 3% stamp duty surcharge, why tax relief on mortgage interest was taken away during 2017 and how the pandemic has left many landlords out of pocket or pursuing rent arrears.
At Pennington we can advise landlords on how to maximise your BTL investment and support you through the minefield of legislation now faced so as always if you need advice on this or anything else on the local property market, please do not hesitate to call me.