Buy to Let Mortgage
Buy to Let Mortgage | Property Investor Market Report
The Buy to let mortgage market is continually evolving. The B2L sector has grown since the first mortgage offers (at least, the first under the Buy-To-Let badge) were issued in the mid-1990s. At the time, the mortgage environment featured only a few Buy-To-Let lenders and BTL financing that was not known for its flexibility. Mortgage lenders had stringent rules about who qualified for a Buy to let mortgage and what the rental cover should be. These BTL mortgage deals were still a tremendous improvement on previous property investment deals, where no account was taken of rental cover in assessing the viability of a BTL deal.
Figures from the Council of Mortgage Lenders (CML) reveal that in 1998 there were 28,700 BTL mortgage advances and this was just the starting point for exponential growth in the sector. By the following year, the number of Buy to let mortgage deals had increased to 73,200, worth £5,400 million. This meant that the number of new Buy to let mortgage advances almost doubled within the space of a year. At that point the typical loan to value for a B2L mortgage was 75 per cent, with an expected rental cover of 130 per cent. The rental cover on a Buy to let mortgage was to remain static for several years.
BTL Loan To Value Changes
However, the maximum loan to value for a Buy to let mortgage would soon change. By 2001, Buy to let mortgage lenders were offering a maximum loan to value of 80 per cent, compared with the previous 75 per cent figure. In that year, the CML reported that there were 72,200 new BTL mortgage loans, to give a total of 185,000 BTL mortgages. The Buy to let mortgage sector was worth £14,700 million at the end of 2001.
Over the next few years, loan to value for a BTL mortgage would remain at 80 per cent, with rental cover staying at the 130 per cent mark. By 2004, there had been 217,700 new BTL mortgage loans at the end of the year, to give a total of 526,300 buy to let mortgage advances outstanding. This was worth £52,200 million, according to the CML.
The market is continuing to change, with the CML's 2005 figures showing alterations in both the maximum loan to value and the rental cover for a Buy to let mortgage. The average maximum loan to value for BTL mortgages is now 83 per cent, with the average rental cover down to 127 per cent. This suggests that buy to let mortgage lenders are becoming more flexible with their criteria. This theory is supported by the proliferation of Buy-To-Let deals, many of them offering the same flexible features that are available to residential mortgage holders.
At the end of 2007, there had been 346,000 new Buy to let mortgage advances. This put the value of the buy to let sector at £120,400 million based on the council of mortgage lenders recent figures. The demand for buy to let has continued this year and the future looks bright for the buy to let mortgage.
