Nic Rotton, Commercial Mortgage Consultant at Sterling Commercial Finance, reflects on Buy-to-Let mortgages as they turn 25 years old.
Last week, I found out that Buy-to-Let (BTL) mortgages were 25 years old in September, having been created back in 1996.
That’s right, before Buy-to-Let had even existed, we had actually sung “Three Lions” for the very first time at the Euros, Blur had “beaten” Oasis in the Battle of BritPop and Google was still 2 years from becoming the monster it is today!
The BTL story began when ARLA (the Association of Residential Letting Agents) met Paragon and Natwest to discuss a better way of financing residential investments. At the time, no financial product specifically catered for residential landlords and the only way they could finance a property portfolio was through commercial mortgage terms which tended to be at higher rates and low loan-to-values. The conversation resulted in an overhaul of the products and processes involved in lending to Landlords and the term ‘Buy-to-Let’ was born.
The new product allowed and encouraged new investment into the Private Rented Sector (PRS). The PRS had been in decline for years but was seeing change through Government deregulation which allowed landlords to determine rent levels, introduced Assured Shorthold Tenancies and added other protections which gave landlords confidence to invest in property.
Nowadays PRS is the UK’s second largest housing tenure accounting for 19% of households, up from 10% in 2001. Renting is no longer seen as a last resort or student dominated. It offers greater flexibility to people for all ages and better suits the lifestyles of many.
We have seen huge Government policy changes, both in regulative and legislative terms with the aim to improve safety and standards in the sector. These also include regulatory changes on Lenders to expand the underwriting criteria with the hope of controlling the level of debt available to fund the growth.
Buy to let is now a hugely competitive market with significantly more funders looking to support landlords than those first two back in 1996. We now see lenders adapting to include HMOs, holiday lets, MUFBs and serviced accommodation.
Sterling Commercial Finance works with landlords to arrange the right funding for their property purchase or refinance. With innovative products and sensible criteria at our disposal, we are supporting more clients than ever before in realising their property ambitions.
