Buy-to-let housing segment is not benefited by interest rate cut |
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Sat, 03 Sep 2005 11:05
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LONDON: The buy-to-let housing segment in the U.K. has not derived any benefit from the recent interest rate cut by the Bank of England. It is facing a critical situation after several years of sustained growth, according to industry sources.
The number of investors in the buy-to-let segment has almost halved in the last one year, according to details compiled by Mortgage Trust. Its study revealed that the number of new investors has fallen from 23 per cent in July 2004 to 12 per cent in May 2005.
According to the Council of Mortgage Lenders, a total of 9.9 billion pounds worth of new buy-to-let mortgages were concluded in the first half of 2005, possibly a better show compared with the second half of 2004, but the number of new loans fell 4 per cent to 94,000. These figures are to be compared with 232,900 mortgages valued at 23.6 billion pounds during July 2003-June 2004 period.
There could be some solace for this sector, as it has been found that more number of first-time buyers are opting out of buying in favour of renting in fashionable areas with their friends.
Meanwhile, banks have been supporting buy-to-let investors. HBOS, Barclays, Mortgage Express, Bank of Scotland and Bristol & West have all provided cash to these investors. They can expect to have capital gain in the days to come as the interest cut is expected to boost the mainstream property market, with property prices going up. And they do have the rental income to stand by too.
Analysts point out that lending institutions are now offering more flexible and affordale mortgage lending. The criteria for lending to buy-to-let investors has also changed with as little as 5 per cent deposit requirements and rental interest cover of only 110-125 per cent, compared to the 130 per cent of a year ago.
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