2015 is already shaping up to be an exciting time for the buy to let market. The previous 12 months saw strong growth in this sector and while the overall rate of growth in the market flattened out in the last quarter I believe we are going to see further good growth in buy to let this year.
Based on our lending experience and the latest figures from the Council of Mortgage Lenders which showed buy to let growth to the end of October, we’re expecting annual growth of around 23% for 2014. In terms of how 2015 might look, while I think we are in for a year of growth given the importance the sector now plays in supporting the overall housing market, I wouldn’t be so bold as to suggest we’ll see a repeat of 2014’s level. I think this sector faces several challenges this year, the biggest of which being how lenders continue to assess overall affordability. I can see greater emphasis placed on the customers overall financial situation rather than simply assessing the buy to let in isolation. BM Solutions has already made sensible moves in this direction.
Interestingly, for those who had previously thought that growth in the buy to let sector was at the expense of the first-time buyer sector, it was great to see the two operating in tandem with the annual growth rate in the first-time buyer market last year growing at a similar rate of 22%. This clearly demonstrates that landlords and first-time buyers can operate successfully together at the same time with both sectors providing valuable support to the housing market overall.
Part of the reason for this growth has been the improvement in market conditions together with low mortgage rates, but it has also been boosted by the increase in new build developments. There is still a significant shortage of supply in the housing market, but developers are now pushing forward to meet demand and we have seen an increase in new developments in the last year with a pipeline into 2015.
New build properties are always very attractive to both first-time buyers and buy to let investors due to the attractive deals, low maintenance costs and new build guarantees etc. Lenders need to recognise this almost as another sub-sector if they are to meet demand. Last year we signalled our support here by increasing the maximum loan to value (LTV) on all new build properties from 65% to 75%. We now have the same maximum LTV for flats and houses and allowing those looking at new build to access our full product range gives brokers confidence in our message that we are fully behind the private rented and new build sectors.
At BM Solutions – as part of Lloyds Banking Group – we intend to demonstrate our continued support for new build by providing one in four new build mortgages going forward.
