The impact of buy to let on the mortgage market

It may seem like it’s, been around forever, but actually, the first buy to let product was only launched in the UK back in 1996. Over the past 27 years, the buy to let sector has had a significant influence on the mortgage market by helping thousands of landlords and opening up the private rental sector.

A history of buy to let

Before buy to let, homeowners who wished to let out their properties did so at a huge risk. With property laws heavily swayed towards the tenants, landlords didn’t have many rights over their own property.

There was also the problem of rent control, which meant the government could restrict how much rent landlords could charge. Essentially, letting your property was seen as a poor investment and the private rental market was struggling.

In 1988, the first Housing Act was announced and was later updated with the 1996 Housing Act. This came with the introduction of the now well-known Assured Shorthold Tenancy Agreement, which outlined legal rights and responsibilities for landlords and added security for tenants.

The Act also lifted rent control, meaning landlords could increase their rent to match market rates, making them much more profitable. In fact, some landlords have such good revenue from their property portfolio that they can rely on it as their sole income.

It’s fair to say they the introduction of these Acts has had a significant impact on the private rental sector, making it a much more attractive option for tenants and a much better investment for landlords.

Recent impact

Recently the BTL sector has come under increasing pressure due to rising mortgage interest rates, the cost of living crisis and changes to the PRS, which appear to favour tenants over landlords. A strong view is that some landlords are being squeezed out of the market.

Despite all the negative conjecture around the buy to let market, USwitch has revealed that buy to let mortgages represented almost 14% of all mortgages approved in 2022 with £8.5 billion worth of properties purchased by UK landlords in the first quarter alone. This suggests that it may not all be doom and gloom for the Private Rental Sector.

Specialist buy to let brokers essential

While lenders have finally begun to reduce their BTL mortgage rates, it is unlikely that rates will ever return to pre-pandemic levels. Landlords who are looking to remain in the BTL market should be leaning on the expertise and knowledge of specialist buy to let mortgage brokers, to ensure they’re getting the best product for their needs.

With access to a wide panel of lenders and advisors with a wealth of knowledge of the market, applying through a broker such as Commercial Trust is often the best way to find a good deal. Our advisors will work with you to weigh up all of the options to ensure you get the best solution for your unique situation.

To speak to our team about your buy to let needs, just call 0808 132 0097 today.