The buy-to-let market has grown by nearly £7 billion in terms of values advanced in 2014. This reflects strong, sustained rental demand, and confidence in the property market. In turn, this has led to an optimistic outlook from lenders in the market, who are backing the buy-to-let market to continue its growth into 2015. In light of this, there has been a wave of major competitors entering the market, which has put downward pressure on mortgage rates.

In turn, these low rates have made buy-to-let even more attractive to many customers, especially when considering how low current saving rates are. There has also been speculation as to whether the market will be impacted by the pension freedoms coming into effect in April 2015, which will allow pensioners more flexibility with how they access their pension pots.

Understanding who these potential investors are is crucial, as is helping them understand the buy-to-let market. This report examines attitudes towards property investment among both non-landlords and existing landlords, and also looks at likeliness to invest. Analysis of key market drivers, such as housing stock, arrear rates, and effective mortgage rates, is also included. The impact of regulatory changes, including the European Mortgage Credit Directive, and pension freedoms are analysed, as is the risk of further regulatory changes.

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).

There are a number of differences between buy-to-let and standard residential mortgages:

• 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% 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 90% 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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