Although the market has flattened out since the boom in buy-to-let investing in 2001/2002, a lack of consumer confidence in pensions is expected to re-fuel growth in buy-to-let lending in 2007. 58 per cent of the mortgage brokers surveyed believe many people will use this type of investment to supplement inadequate pension savings.
In addition, 93 per cent of the mortgage brokers surveyed are positive about the property market’s outlook in 2007. Contrary to recent negative market speculation, none of the mortgage brokers surveyed feels the market will decrease significantly and only 3 per cent feel that the housing market will decrease in value at all.
The survey found that 55 per cent of mortgage brokers believe the housing market will grow in 2007 and 38 per cent believe that it will stabilise.
Penrose Financial Public Relations commissioned Lighthouse to conduct “The Future of the Mortgage Market” research amongst 100 mortgage brokers in November of this year.
The research shows that mortgage brokers are expecting to see a growth in specialist mortgages and in particular, buy-to-let. Other reasons for an expected growth in buy-to-let lending, apart from a lack of confidence in retirement savings, include large City bonuses, a nervousness of the stock market pushing consumers to invest in something tangible, and an increase in young people looking to rent rather than buy due to increasing house prices fuelling the rental market.
The mortgage brokers surveyed felt the only potential deterrent to a boom in buy- to-let was increasing interest rates and low rental yields.
Claire Burston, partner and head of the consumer finance team at Penrose, said: “The research highlights some interesting consumer trends. People are becoming increasingly aware of the need to supplement their existing savings prior to retirement and this will result in a boom in the buy-to-let market according to the brokers we have surveyed. In addition, house prices are preventing young people from buying and will further fuel the market by a demand for rental properties.
"This research shows that contrary to many recent industry reports, the outlook for the property market is positive. None of the mortgage brokers surveyed felt the housing market will crash and over half think it will continue to grow going forward into 2007.”
The research also highlighted the following trends:
- 64 per cent of mortgage brokers believe specially adapted first home buyer mortgages implemented by the government will grow in popularity in 2007.
- 63 per cent of mortgage brokers believe that mortgages for properties purchased abroad will grow.
- 44 per cent of mortgage brokers believe that lenders offering up to eight-times income multiples to first home buyers will increase.
- 43 per cent believed that deathbed mortgages which allows parents to pass their interest only mortgages onto their children, reducing inheritance tax will grow.
- 40 per cent believe that home reversion mortgages will grow.
- 28 per cent believe that Sharia compliant mortgages will grow and 18 per cent believe that ethical mortgages will grow.
“It is however alarming that so many mortgage brokers believe that instead of protecting the consumer we will see an increasing amount of lenders offering up to eight-times income multiples to first home buyers. This encourages young people to be hugely indebted and may lead to default on payments or, in the worse case scenario, repossession of the property.”
