What does the future hold for BTL?

After many predictions over the past few years that the BTL market would go into a terminal decline, the reality is that, mortgage borrowing for the private rental market has reached a record high.  

There were 2.02 million outstanding BTL mortgages at the end of June, up from 1.65 million at the end of 2014, according to the banking trade body UK Finance.

However, if we want to see what is in prospect for the market in the immediate future, certain factors need to be considered, the biggest of which is the end of the stamp duty holiday.

The holiday was definitely a welcome catalyst to home buying. Bank of England figures for the first quarter of 2021 show a 26.5% increase on the same period in 2020, which roughly coincided with the start of the first lockdown.

Once the taper finishes at the end of September and SDLT resumes at its old rate, it will clearly have a greater effect on would be landlords and second home seekers because of the continuing 3% surcharge on property purchases.

That said, market demand remains robust due to the enduring mismatch between supply and demand. The shortage of property for rent is directly linked to growing demand, which in turn is powered by a trend away from home ownership. Reluctantly, many would be buyers have had to turn their backs on buying as property prices have increased, especially so over the period covered by the SDLT holiday.

Increased rights for tenants have also helped create a more stable environment for people taking up tenancies. The numbers renting are also increasing because it provides the flexibility to move quickly and be more mobile when chasing career moves for example. For others, renting today is becoming a life choice, with the past motivation of homeownership taking a back seat to save for more immediate needs such as holidays and a ‘live today’ lifestyle.

Our research suggests that there has been a shift away from amateur landlords who own one or two buy-to-let properties, towards professional and semi-professional landlords who treat it as a business. This has been a consistent trend and we expect it to continue.

The future for BTL, despite the moves to curtail tax benefits, remains strong. For landlords, funding is plentiful and interest rates and LTV criteria are at their most attractive at the moment.

The private rental sector is fundamental to the housing market and will continue to play a vital role in the UK’s housing market.

For more information or to discuss any of your BTL cases please get in touch using our BDM finder.