Exact polled 549 mortgage intermediaries as part of their research into the future performance of the buy-to-let sector. Of the 83% who said their clients were looking to expand their portfolios further, over half (55%) said further investment was motivated by the belief that we are nearing the bottom of the housing market. 22% of brokers said BTL investors saw property as offering the best long-term returns when compared with other asset classes.
Alan Cleary, managing director of Exact mortgage experts, said, “Investors have faith in the buy-to-let sector. With so many people cut off from getting a mortgage, be they first time buyers or people with less than perfect credit records, the UK’s private rented sector will inevitably have to pick up the slack. That means there’s money to be made by landlords. But there continues to be a severe shortage of buy to let mortgage products on the market, and it’s putting the brakes on potential investment in the sector.”
The Exact research also considers the future shape of the buy-to-let mortgage market, suggesting lenders should increasingly assess buy-to-let applications on the quality of underlying collateral in the future. The paper argues that buy-to-let arrears performance has been distorted by an overexposure to new build property concentrated in city centres where tenant demand has been unable to meet supply. Having performed credit assessment on several billion pounds worth of buy-to-let assets this year, Exact suggests the performance of this asset class is most heavily dependent on the type of property underlying the mortgage – a criteria previously given little weight by lenders when assessing a mortgage application.
Alan Cleary, managing director of Exact mortgage experts, said, “Buy-to-let has been demonised because of higher than average delinquency rates. But the buy-to-let asset class covers a vast number of very different borrower types and very different asset collateral. Arrears rates have been skewed by over-investment in city centre new build developments where there was no demand for rented accommodation and lenders have been put off offering buy-to-let products as a result. But BTL borrowers can be a better credit prospect than prime borrowers if the underlying property is good quality. Underwriting buy-to-let mortgages needs to tighten up though – lenders should consider the standard of collateral more carefully in the future to insulate against unduly high buy-to-let arrears.”