The buy-to-let market is firmly in recovery mode, with the value of new buy-to-let advances up by nearly a third in 2013 on the previous year. Sales of buy-to-let mortgages are being buoyed by rising confidence, more positive economic indicators and strong underlying fundamentals, with sustained demand for rented accommodation. Product availability has also increased over the past year, while lending criteria has moderately eased and mortgage rates remain low. This has helped more people to purchase buy-to-let property and existing landlords to remortgage.

The question is will the recent strong momentum seen in the buy-to-let market be maintained in 2014, and beyond? Mintel’s report seeks to answer this question, by drawing on a range of industry data, trade sources and consumer research analysis. The report will explore the main issues and variables exerting influence over the market, identify the main players and their respective market shares, and assess the market’s prospects for further growth.

Mintel’s consumer research additionally provides insight into direct property investment (including the means of financing it), as well as general consumer attitudes toward investing in buy-to-let.

A buy-to-let mortgage is a special type of mortgage advanced on a property that is, or is intended to be, let to tenants. Viewed as a form of commercial lending, the vast majority of buy-to-let mortgages fall outside the regulatory remit of the Financial Conduct Authority (FCA).

As with most financial products and services, product differentiation is primarily linked to price. Products differ according to the interest rate charged, which is itself determined by a number of factors including loan type (eg fixed, discounted or variable rate), the length of the term, the borrower’s credit history, the loan-to-value (LTV) and expected rental income. Pricing models now also tend to take into account personal income, with some lenders setting minimum income levels.

The main points to note are that:

• Rates on buy-to-let mortgages tend to be higher than on standard residential mortgages, typically 1% higher.

• Product arrangement fees also tend to be higher, with lenders typically charging anything from 0.5%-3.5% of the amount advanced or flat fees from around £1,000 (although there are products with no arrangement fees).

• Some lenders also charge booking and/or completion fees.

• Borrowers are required to put down a deposit, and the typical minimum requirement is currently equivalent to 20-25% of the purchase price (although it is now possible to get 85% LTV).

• Most lenders also require that the expected rent exceeds mortgage payments by at least 25% for single-unit properties, or 30% for Houses in Multiple Occupation (HMO).

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