Buy to let mortgage lending set to rise

Buy to let mortgage lending set to rise

20 January 2010 / by Rachael Stiles

Buy to let mortgage lending could rise in the first quarter of 2010 as 10 per cent of current landlords intend to purchase an investment property, research from Paragon Mortgages has found.

But the landlords' aspirations could be thwarted by the continuing lack of competition in the buy to let mortgage sector, which could hamper many potential purchases.

Paragon Mortgage's Trends' study found that one in 10 landlords want to expand their property portfolio in the first quarter of this year, and that terraced property is at the top of the list for the majority of investors, because it is generally well-constructed, and popular with tenants, offering strong yield potential.

But, a shortage of buy to let mortgage deals will continue to be a "serious issue" for residential landlords looking to invest in the early months of 2010, Paragon predicts, as landlords reported it was more difficult to secure a mortgage during the final quarter of 2009 compared to the previous quarter.

Commenting on the figures, John Heron, managing director of Paragon Mortgages', said: "It is encouraging that landlords are still active in the market and are looking to expand their portfolios. With tenant demand at such strong levels and soft house prices presenting the opportunity for bargains, it is easy to see why."

Mr Heron added that Paragon Mortgages see no indication  in the  buy to let mortgage market that competition will recover quickly, as it continues to be dominated by just a few lenders.

"Most buy-to-let lenders currently active in the market employ aggregate or maximum lending levels, placing a ceiling on the number of properties they will lend against, which makes it difficult for professional landlords to expand portfolios because they are usually already at those lending levels," he explained.

"It is ironic that the criteria employed by most lenders favours inexperienced landlords over those with proven track records in residential property investment and management.' 

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