Mortgage News Buy To Let Mortgage Market To Lose 18 billion Pounds

Written by Editorial Team

20 August 2008 / by Daniela Gieseler

Due to the problems currently facing the British property market, thousands of buy-to-let investors will pull £18billion out of the market in coming years, according to a new study from investment company Skandia.

In the wake of falling house prices, residential investors will sell two thirds of their properties, Skandia predicted. Compared to the overall trend of falling house prices, new-build flats and apartments which were to be sold as investments have seen a particularly sharp drop.

With buy-to-let-mortgage providers curbing their lending drastically and mortgage costs rising, many landlords are struggling to get enough rent in to cover their monthly costs, and may wonder if their investment is worth their while.

Skandia expects the value of buy-to-let mortgages outstanding to fall by nearly two thirds, from the current figure of £120billion to just £44billion.

Nick Poyntz-Wright, CEO of Skandia UK, explained: “Private investors have accumulated significant amounts of equity in buy-to-let-properties after a long period of strong growth in home and flat values.

“Higher mortgage rates and falling property prices will cause investors to reconsider their exposure to residential property and many will choose a more diversified approach”, he added. “With inflation rising, investors realise the need for strategies that preserve their wealth.”

In contrast to Skandia, others believe that rental property will remain a key element of the market for some time to come. New figures from the Royal Institution of Chartered Surveyors (RICS) have shown an unprecedented number of property owners are forced to rent out their properties as homebuyers’ demand hits an all-time low.

As a growing number of Brits postpone buying a home until house prices are rising again and look into renting instead, rents continue to rise. Currently, the yield buy-to-let investors get from their properties is increasing at the fastest rate since Skandia started the survey 10 years ago, family homes being in particularly high demand.

However, surveyors predict that rental growth will slow down in the future when mortgages become more readily available again and consequently the home buying market will pick up.

© Fair Investment Company Ltd