Buy to let mortgages could see boost with landlords' purchase plans

Buy to let mortgages could see boost with landlords' purchase plans

15 April 2010 / by Rachael Stiles

The buy to let mortgage market could see a boost shortly as more existing landlords intend to purchase an investment property in the second quarter of the year.

According to figures from Paragon Mortgages, the growing proportion of landlords who intend to purchase another residential property in the next few months are reacting to a growing demand from tenants for rental properties, with more than a quarter of landlords reporting a rise in demand during quarter one.

Paragon's survey of the buy to let mortgage sector shows that 12 per cent of landlords plan to purchase property for this purpose in the second quarter, compared to 10 per cent who said they would buy in the first quarter of 2010.

This also reflects the fact that the average landlord's portfolio has risen in value for the second consecutive quarter, illustrating that demand for buy to let property is on the rise.

Terraced houses remain the preferred option for buy to let landlords, with 67 per cent purchasing this type of property, and the second most popular property type is semi-detached housing, accounting for 25 per cent of purchases.

Commenting, Nigel Terrington, chief executive of Paragon Group, said: "Demand for property investment has remained strong during the recession and has improved since house prices stabilised. Landlords know that the long-term forecast for tenant demand is extremely healthy, with socio-economic and demographic changes leading to growth in the number of households calling the private rented sector home."

He also commented on the shift towards privately rented accommodation: "Government figures show that the private rented sector is the only housing tenure that is currently growing. The proportion of households in both owner-occupation and social housing was in decline for the best part of the previous decade, and the private rented sector has picked up the slack. One in seven households now lives in privately rented accommodation."

While house prices remain unstable, and mortgage finance difficult to come by, landlords are in a strong position. Mr Terrington added that landlords "are enjoying unprecedented levels of tenant demand, and structural changes taking place in the UK will create further demand," and will lead to a higher rental income. 

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