While mortgage rates for owner-occupiers are dropping amid an ever-competitive market towards the end of 2014, the state of play in the buy-to-let market is even more encouraging.
According to recent reports this particular sector is now 18-years-old, having got underway in 1996. The Housing Act in 1988 followed by the introduction of mortgages for buy-to-let properties, have led to a strong marketplace for both the mortgages themselves and those who wish to buy properties to rent out.
Almost 20% of homes in Britain are owned by private landlords
This is a startling figure that could only have been dreamed of a few short years ago. Today around 4.9 million properties across Britain are owned by private landlords. Together the mortgages they hold on them amount to some £1 trillion in value.
The number of landlords has risen sharply as well. A couple of decades ago the numbers were extremely small. Now around two million landlords exist in the private sector, sharing the 4.9 million properties between them.
New builds are commonly rented
The figures become even more startling if you look at the number of new homes that have been built since the mid-Eighties through to 2012. Surprisingly, over 50% of these are now rented out privately.
While many of the news headlines of late have been grabbed by the Mortgage Market Review and the falls in interest rates on new mortgage products, the buy-to-let market has been quietly going about its usual business. However, could it be possible we are seeing the calm before the storm? Or perhaps, to use another phrase you may well be familiar with, the boom before the bust?
Rising interest rates could threaten the buy-to-let market
The Governor of the Bank of England, Mark Carney, has warned several times of late that interest rates could well be set to rise in the New Year. They have remained historically low for some time now – long enough, in fact, to lull people into a false sense of security over what they spend on their monthly mortgage payments.
Some experts have calculated that if interest rates were to rise in the manner suggested by Mr Carney, lots of buy-to-let landlords could find themselves with a negative cash flow. This means the rents they would be collecting from their properties would not be enough to meet the mortgage payments – let alone any other outgoings they would have in terms of maintenance and upkeep of the property.
According to data released by the Council of Mortgage Lenders (CML), buy-to-let lending increased by a whopping 44% from the last months of 2011 through to the same period in 2013. These are mortgages which are still very new, and these may be at a bigger risk of putting their owners into troublesome territory.
Certainly, as the time for a rise in interest rates draws ever closer, it is not just owner-occupiers who are at risk of higher monthly mortgage payments. As we can see, it will hit the buy-to-let market just as hard as well.