Abstract
Overview
Introduction
After a decade of existence, buy-to-let has become very popular among investors and now accounts for a significant share of the total UK gross mortgage lending. But what are the future prospects for this sector? What challenges does it face? How is the competitive structure of the buy-to-let mortgage market changing? This report provides the answers.
Scope
- Uses Datamonitor' s Intermediary Niche Mortgage Survey to understand intermediaries' views on a number of areas.
- Provides the market share of the leading lenders in the UK buy-to-let mortgage market.
- Provides three 5-year scenario-based forecasts.
Report Highlights
Datamonitor' s Intermediary Niche Mortgage Survey reveals that the majority of the intermediaries surveyed - 59.2 per cent - stated that their buy-to-let mortgage business increased either slightly or significantly in 2006, thus further stressing the robust performance of this sector in 2006.
The significant expansion of the buy-to-let mortgage market has not been without criticism. Indeed, as the sector has grown in size, some commentators have started suggesting that buy-to-let investors are pricing first-time buyers (FTBs) out of the property market.
The numerous small players operating in the buy-to-let sectors have collectively increased their market share substantially, although they are insignificant individually.
Reasons to Purchase
- Keeps you up to date with the dynamic buy-to-let sector by providing you with in-depth analysis of the major issues in this market.
- Gives the reader insight into the views of intermediaries in a variety of areas across the market.
- Draw on Datamonitor' s five-year scenario-based forecasts to plan your future strategy with confidence.
Table of Contents
- Overview
- Catalyst
- Summary
- Executive Summary
- The buy-to-let mortgage market reached a record high of £34.8 billion in
2006
- The buy-to-let mortgage market grew impressively in 2006
- The strength of the buy-to-let mortgage market over 2006 was also reflected in intermediaries' new business
- The buy-to-let mortgage market grew impressively in 2006
- A number of factors have driven the buy-to-let mortgage market upward
- Sound macro-economic conditions have laid the foundation for a strong buy-to-let market
- Moreover, other factors specific to the buy-to-let market have significantly impacted on gross lending
- There are two major types of player in the buy-to-let mortgage market
- On the lender side, specialist players continue to dominate the
buy-to-let mortgage market
- Competition has intensified as the number of buy-to-let lenders has
increased
- Increasing competition is being reflected in a number of areas
- Competition has intensified as the number of buy-to-let lenders has
increased
- On the distribution side, intermediaries play a bigger role than lenders
- The prevalence of specialist lenders in buy-to-let means that the intermediary channel is the dominant form of distribution
- Under the Datamonitor View scenario, the buy-to-let mortgage market will reach £69.2 billion in gross advances in 2011
- The buy-to-let mortgage market reached a record high of £34.8 billion in
2006
- Table of Contents
- Table of figures
- Table of tables
- An Introduction to the Buy-to-let Mortgage Market
- The buy-to-let mortgage market reached a record high of £34.8 billion in
2006
- The buy-to-let mortgage market grew impressively in 2006
- The strength of the buy-to-let mortgage market over 2006 was also reflected in intermediaries' new business
- The buy-to-let mortgage market was a major driver of the outstanding
performance of the UK total mortgage market in 2006
- The expansion of the buy-to-let mortgage market was faster than that of the self-certification mortgage market
- The fact that the buy-to-let mortgage market has expanded significantly has led to some stating that buy-to-let is preventing first-time buyers from entering the property market
- The buy-to-let mortgage market grew impressively in 2006
- A number of factors have driven the buy-to-let mortgage market upward
- Sound macro-economic conditions have laid the foundation for a strong
buy-to-let market
- A relatively strong UK economy has assisted in boosting the buy-to-let mortgage market
- The base rate has remained relatively low despite successive increases
- Unemployment has remained low for a number of years
- Strong house price inflation has contributed to drive the buy-to-let mortgage market forward
- Moreover, other factors specific to the buy-to-let market have
significantly impacted on gross lending
- The deregulation of the rental sector made property investment a more attractive proposition
- Property is seen as an attractive long-term investment
- Several factors are driving demand for private rented properties
- Sound macro-economic conditions have laid the foundation for a strong
buy-to-let market
- Going forward, the buy-to-let mortgage market faces challenges
- There are concerns that tighter regulations in the private rented
sector are creating too much burden for landlords
- Increased regulations are creating too much red tape and leading to higher costs for landlords
- Are inexperienced landlords prepared enough to deal with unexpected
costs, particularly in a rising interest rate environment?
- Arrears and repossession levels are currently low in the buy-to-let mortgage sector
- But how prepared are inexperienced investors for the costs involved with being a landlord?
- There are concerns that tighter regulations in the private rented
sector are creating too much burden for landlords
- The buy-to-let mortgage market reached a record high of £34.8 billion in
2006
- The Competitive Landscape of the UK Buy-to-let Mortgage Market
- There are two major types of player in the buy-to-let mortgage market
- On the lender side, specialist players continue to dominate the
buy-to-let mortgage market
- In terms of lender type, small building societies dominate in number
- Banks came in second in terms of number of players
- In terms of market share, specialist lenders still dominate the
buy-to-let mortgage market
- The top three buy-to-let mortgage lenders occupied 39.4 per cent of the market
- Competition has intensified as the number of buy-to-let lenders has
increased
- The majority of buy-to-let mortgage intermediaries surveyed by Datamonitor stated that competition among lenders has intensified
- Increasing competition is being reflected in a number of areas
- A sub-prime buy-to-let market has emerged in recent years
- The majority of intermediaries Datamonitor surveyed serve sub-prime customers in buy-to-let
- Going forward, intermediaries believe that sub-prime buy-to-let will expand further
- In terms of lender type, small building societies dominate in number
- On the distribution side, intermediaries play a bigger role than lenders
- The prevalence of specialist lenders in buy-to-let means that the intermediary channel is the dominant form of distribution
- Given the importance of intermediaries in the buy-to-let sector, it is
important for lenders to adapt their proposition to meet their needs
- Speed of processing has become crucial in the intermediary channel for all mortgage markets
- Forecasting the Buy-to-let Mortgage Market
- Three buy-to-let forecasting scenarios are presented
- In addition, Datamonitor' s bespoke forecasting model considers drivers specific to buy-to-let
- Under the Datamonitor View scenario, the buy-to-let mortgage market will reach £69.2 billion in gross advances in 2011
- Under the Optimistic scenario, buy-to-let gross advances will grow impressively to reach £51.9 billion in 2011
- Under the Pessimistic scenario, the buy-to-let mortgage market will feel the pinch but will fare better than the wider mortgage market
- Conclusions
- Three buy-to-let forecasting scenarios are presented
- APPENDIX
- Supplementary data
- An introduction to the buy-to-let mortgage market
- The competitive landscape of the buy-to-let mortgage market
- Definitions
- Bank of England base rate
- Balances outstanding
- Buy-to-let mortgage
- CAGR
- CCJs
- Gross advances
- Mortgage intermediary
- Non-standard and sub-prime
- Professional landlords
- Remortgaging
- Methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Ranking of top ten buy-to-let mortgage lenders by gross advances, 2005 to 2006
- Table 2: All top ten UK mortgage lenders have a presence in buy-to-let , May 2007
- Table 3: List of buy-to-let mortgage lenders, March 2007
- Table 4: Ranking of top ten buy-to-let mortgage lenders by gross advances, 2005 to 2006
- Table 5: Buy-to-let gross advances and market share for the top eight buy-to-let lenders, 2006
- Table 6: Maximum property portfolio for the top ten buy-to-let lenders, March 2006 and 2007
- Table 7: Maximum LTV offered by the top ten buy-to-let lenders, March 2005 to 2007
- Table 8: Maximum borrowing amount for the top ten buy-to-let lenders, March 2005 to 2007
- Table 9: Average interest rate of top ten buy-to-let lenders and the base rate, March 2005 to 2007
- Table 10: Forecast of buy-to-let gross advances under Datamonitor View scenario, 2006 to 2011f
- Table 11: Forecast of buy-to-let gross advances under an Optimistic scenario, 2006 to 2011f
- Table 12: Forecast of buy-to-let gross advances under a Pessimistic scenario, 2006 to 2011f
- Table 13: Buy-to-let gross advances and number of loans, 1999 to 2006
- Table 14: Buy-to-let gross advances market share, 1999 to 2006
- Table 15: Indexed growth rate of buy-to-let and self-certification mortgages, 2002 to 2006
- Table 16: Buy-to-let loans and first-time buyer loans, 2002 to 2006
- Table 17: Annual house price growth on a quarterly basis, Q1 2003-Q4 2006
- Table 18: Average size of a buy-to-let loan, 2002 to 2006
- Table 19: Have you seen an increase in demand from first-time buy-to-let investors in 2006?, March 2007
- Table 20: Have you seen an increase in demand from existing buy-to-let investors in 2006?, March 2007
- Table 21: Quarterly change in Average Annual Rate of Return (Geared investment), Q1 2006 - Q4 2006
- Table 22: Which of the following regions in the UK are the top 3 hot spots for BTL investors?, March 2007
- Table 23: Migration inflow to the UK, 1996 to 2005
- Table 24: In which way has competition among lenders intensified in the BTL sector?, March 2007
- Table 25: What proportion of your BTL customers have an adverse credit story? March 2007
- Table 26: In your opinion, have you seen an increase in demand for BTL from customers with an adverse credit story?, March 2007
- Table 27: Please rate how important the following factors have been in your choice to use your number one lender more than any other, March 2007
- List of Figures
- Figure 1: The buy-to-let market saw a significant increase in both gross lending and number of loans in 2006, 1999 to 2006
- Figure 2: The majority of mortgage intermediaries interviewed stated that they saw an increase in buy-to-let gross advances in 2006
- Figure 3: Intensifying competition among lenders is being reflected in a number of areas, March 2007
- Figure 4: Under the Datamonitor View scenario, buy-to-let gross advances will reach £45.4 billion in 2007
- Figure 5: The buy-to-let market saw a significant increase in both gross lending and number of loans in 2006, 1999 to 2006
- Figure 6: The majority of mortgage intermediaries interviewed stated that they saw an increase in buy-to-let gross advances in 2006
- Figure 7: Buy-to-let gross advances accounted for 11.1 per cent of the UK mortgage market in 2006, 1999-2006
- Figure 8: The buy-to-let mortgage sector has outperformed the self-certification mortgage market over the last five years, 2002 to 2006
- Figure 9: The number of buy-to-let loans advanced in recent years has increased considerably whereas loans advanced to first-time buyers have fallen below previous levels, 2002-2006
- Figure 10: Data from both Halifax and Nationwide highlights that house price growth picked up in 2006 after appearing to cool down , Q1 2003 - Q4 2006
- Figure 11: The average size of a buy-to-let loan has increased over the years, 2002 to 2006
- Figure 12: Demand for buy-to-let remains dominated by experienced investors, March 2007
- Figure 13: Of the intermediaries stating that they have seen an increase in demand from first-time buy-to-let investors, a higher proportion stated that this increase was less than ten per cent, March 2007
- Figure 14: 33.3 per cent of intermediaries who witnessed an increase in demand from existing investors in 2006 stated that this rise was between ten and twenty per cent, March 2007
- Figure 15: Average rates of return fell in H2 2006 partially as a result of increases in the base rate, Q1 2006 to Q4 2006
- Figure 16: Prime Central London and the North West are the top two regions for buy-to-let investors, March 2007
- Figure 17: Roughly 565,000 individuals migrated into the UK in 2005, a 77.7 per cent increase over 1996 level, 1996 to 2005
- Figure 18: The majority of intermediaries interviewed by Datamonitor believed that the buy-to-let mortgage market will grow steadily in the future, March 2007
- Figure 19: The structure of the buy-to-let mortgage market, June 2007
- Figure 20: Small building societies dominate in number in the buy-to-let mortgage sector, March 2007
- Figure 21: The top three lenders accounted for 39.4 per cent of buy-to-let gross advances in 2006
- Figure 22: 89.8 per cent of intermediaries surveyed stated that competition among lenders has intensified, February 2007
- Figure 23: Intensifying competition among lenders is being reflected in a number of areas, March 2007
- Figure 24: Despite a rising base rate in 2007, the differential between the average interest rate on a buy-to-let mortgage and the base rate has fallen consistently, March 2005 to 2007
- Figure 25: The proportion of intermediaries' customers accounted for by the sub-prime segment in buy-to-let is small, March 2007
- Figure 26: The majority of intermediaries who saw an increase in sub-prime buy-to-let customers recorded less than a ten per cent increase, March 2007
- Figure 27: 61.7 per cent of intermediaries surveyed believe that sub-prime buy-to-let will grow in the future, March 2007
- Figure 28: 83.7 per cent of intermediaries consider competitive pricing as being very important when choosing their number one player, March 2007
- Figure 29: Under the Datamonitor View scenario, buy-to-let gross advances will reach £45.4 billion in 2007
- Figure 30: Under the Optimistic scenario, buy-to-let gross advances will occupy a 19.9 per cent share of total mortgage gross advances in 2011
- Figure 31: Under the Pessimistic scenario, buy-to-let gross advances will contract in 2007 and 2008 but will still fare better than the wider mortgage market
- Supplementary data
