DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
The buy-to-let market experienced a significant contraction in 2009 2
Buy-to-let gross lending collapsed in 2008 and 2009 2
Mortgage intermediaries have confirmed the reduction in buy-to-let lending 4
There was no expenditure on buy-to-let-related advertising in 2009 5
Product structure and pricing have remained largely unchanged over the last 12 months 6
The rates offered by a few buy-to-let lenders have started to edge down 6
Maximum LTVs have remained virtually unchanged over the last 12 months 7
There have been few changes to the size and structure of fees over the last year 8
Minimum advances have not changed at all since June 2009 9
Most lenders have not altered their maximum advances 9
Maximum portfolio sizes have remained static 10
Several lenders do not make their offers available to first-time investors 11
The number of buy-to-let lenders continued to fall in 2009 11
The market for buy-to-let loans has become highly concentrated 12
The exodus of lenders has led to a dramatic reduction in the number of buy-to-let products available 12
Credit-impaired products have been completely unavailable for over a year 13
Several factors are responsible for shaping the current market 13
The collapse in wholesale funding has led to a mass exodus of buy-to-let lenders from the market 14
Buy-to-let mortgages have become much more difficult to obtain since the credit crunch 14
Lloyds Banking Group announced new restrictions on buy-to-let lending in late 2009 14
Arrears and repossessions on buy-to-let mortgages remain in line with the wider market 14
Buy-to-let arrears have generally been lower than total market arrears 14
Repossessions in the buy-to-let sector have mirrored the market as a whole 15
Low interest rates have helped to minimize the incidence of arrears and repossessions 16
The buy-to-let sector fell victim to widespread fraud in recent years 17
New-build properties provided plenty of scope for fraudulent activity 17
Investigators have highlighted the growth of mortgage fraud 17
The Financial Services Authority has taken action to help combat fraud 18
The buy-to-let market will gradually recover over the next few years 18
Intermediaries are hesitant about sales prospects for buy-to-let mortgages over the next two years 19
Landlord surveys point to a slowly improving market for the rental sector 19
Only one in 10 landlords are planning to reduce their exposure to the property market during 2010 20
More landlords bought rather than sold properties in 2009 20
A substantial proportion of landlords are having to deal with tenants that are struggling to make payments 21
The popularity of renting has risen over the last year 21
The relative demand for rental property recovered strongly in the second half of 2009 22
Extremely few letting agents are seeing increases in achievable rents 24
The composition of landlords is starting to change 24
The growth in the number of 'reluctant landlords' started to wane in 2009 25
Small-scale landlords are leaving the market 25
Other factors suggest the beginnings of a tentative recovery in the fortunes of the buy-to-let sector 26
The buy-to-let sector has been subjected to close scrutiny by regulators and the government 26
The MMR recommended bringing buy-to-let mortgages under the FSA's remit 27
The treasury is consulting on whether to extend regulation to cover buy-to-let lending 27
The CML has serious worries about the nature of the proposed regulation 28
Other interested parties raised additional concerns 29
The treasury is currently consulting on investment in the private rented sector 30
Buy-to-let gross lending is likely to remain subdued for several years 30
A limited supply of credit will hold back buy-to-let gross advances over the next few years 30
Demand for financing will recover more quickly than supply 31
Datamonitor forecasts buy-to-let gross lending to reach £25.6 billion in 2014 31
Datamonitor has produced two alternative forecasts in light of variable market conditions 33
The optimistic forecast sees buy-to-let gross advances achieving £35 billion by 2014 33
In the pessimistic forecast, buy-to-let gross advances will increase at a slow rate to £11.5 billion in 2014 34
APPENDIX 36
Supplementary data 36
Definitions 43
Bank of England base rate 43
CAGR 43
Gross advances 43
Remortgaging 43
Methodology 43
Further reading 44
Ask the analyst 44
Datamonitor consulting 44
Disclaimer 44
List of Tables
Table 1: Variable rates offered by main buy-to-let lenders, June 2009 to March 2010 7
Table 2: Maximum LTVs offered by main buy-to-let lenders, June 2009 to March 2010 8
Table 3: Fees charged by main buy-to-let lenders, June 2009 to March 2010 8
Table 4: Minimum advances offered by main buy-to-let lenders, June 2009 to March 2010 9
Table 5: Maximum advances offered by main buy-to-let lenders, June 2009 to March 2010 10
Table 6: Maximum portfolios allowed by main buy-to-let lenders, June 2009 to March 2010 10
Table 7: Eligibility of first-time buyers by main buy-to-let lenders, June 2009 to March 2010 11
Table 8: Buy-to-let lenders listed by Moneyfacts, March 2010 12
Table 9: Forecast buy-to-let gross advances under the Datamonitor view, 2010-14 32
Table 10: Forecast buy-to-let gross advances under the optimistic view, 2010-14 34
Table 11: Forecast buy-to-let gross advances under the pessimistic view, 2010-14 35
Table 12: Annual buy-to-let gross advances, 1999-2009 36
Table 13: Quarterly buy-to-let gross advances, 2006 Q3 to 2009 Q4 36
Table 14: Changes in gross advances handled by intermediaries between 2008 and 2009 (%) 37
Table 15: Percentage of mortgages more than three months in arrears (%) 37
Table 16: Percentage of mortgages taken into possession (%) 38
Table 17: Sales prospects for mortgages over next two years 38
Table 18: Proportion of landlords who are buying and selling properties (%) 39
Table 19: Proportion of letting offices reporting more tenants than properties (%) 40
Table 20: Proportion of letting offices reporting an increase in rental supply due to an inability to sell properties (%) 40
Table 21: Proportion of letting offices reporting that achievable rent levels have increased (%) 41
Table 22: Advertising spend on buy-to-let mortgages, 2007-08 41
Table 23: Total number of available buy-to-let products 42
List of Figures
Figure 1: Buy-to-let gross lending fell drastically between 2007 and 2009 3
Figure 2: The decline in buy-to-let lending activity accelerated in the third quarter of 2008 4
Figure 3: 75% of mortgage intermediaries experienced a fall in buy-to-let gross advances in 2009 5
Figure 4: Buy-to-let advertising activity ground to a halt in 2009 6
Figure 5: The number of buy-to-let products has stagnated since May 2008 13
Figure 6: Arrears on buy-to-let mortgages have generally been lower than for the market as a whole 15
Figure 7: Repossession rates on buy-to-let mortgages have matched those for all mortgages 16
Figure 8: Buy-to-let lending is unlikely to rise or fall sharply in the foreseeable future, according to brokers 19
Figure 9: More letting offices reported seeing landlords buy property than sell in 2009 21
Figure 10: The proportion of letting offices reporting more tenants than properties recovered in 2009 23
Figure 11: Only around one in 10 letting offices saw an increase in achievable rents in 2009 24
Figure 12: Fewer letting offices saw an increase in rental supply due to an inability to sell properties in 2009 25
Figure 13: In Datamonitor's view, buy-to-let gross advances will rise to £25.6 billion by 2014 32
Figure 14: Buy-to-let gross advances will reach £35 billion in 2014 under the optimistic forecast 33
Figure 15: The pessimistic forecast sees buy-to-let gross advances reaching £11.5 billion in 2014 35
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