Table of Contents
Executive Summary
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- The market
- New buy-to-let advances increased 24% in 2014
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- Figure 1: Market forecast of new buy-to-let mortgage loans, 2009-19
- The market is set to grow 15% in 2015 to £31.4 billion in new loan values
- Market factors
- The rental market continues to expand as demand grows
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- Figure 2: UK Housing stock, by tenure 2009-14
- New private builds improve 5% year on year but supply still falls short of demand
- Regulation update
- Company, brands and innovation
- Lloyds Banking Group and Nationwide dominate the market
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- Figure 3: Market share of sub-total of Top 7 lenders, 2014
- Growing presence of other high street banks
- New challengers appear
- The consumer
- 6% of GB adults are landlords
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- Figure 4: Rental property ownership, December 2014
- Self-employed individuals were also three times more likely than average to be a landlord
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- Figure 5: Additional property ownership, by working situation, December 2014
- 13% of non-landlords aged over 55+ with a pension are considering investing in buy-to-let
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- Figure 6: Non-Landlords’ investment plans, by investment ownership, December 2014
- Roughly one in five landlords have a buy-to-let mortgage
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- Figure 7: How landlords are funding properties, December 2014
- One in 10 landlords are serious considering buying another property to add to their portfolio
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- Figure 8: Landlords’ future investment plans, December 2014
- More than a quarter of non-landlords would consider becoming a landlord
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- Figure 9: Non-landlords’ future investment plans, December 2014
- Barriers to entry for non-landlords
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- Figure 10: Non-landlords’ investment plans, by attitudes towards buy-to-let, December 2014
- What we think
Issues and Insights
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- The calls for regulation and the impact of the European Mortgage Credit Directive
- The issues
- The implications
- Impact of pensions reform in April 2015
- The issues
- The implications
- England’s shifting housing dynamics
- The issues
- The implications
Trend Application
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- 55-64-year-olds represent a challenging yet potentially fruitful market
- Buy-to-let product marketing should aim for transparency
- Proactively regulate the market, or risk state intervention
Market Drivers
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- Key points
- Demand for buy-to-let lending dropped significantly in Q4 2014
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- Figure 11: Demand for buy-to-let and prime lending, 2010-14
- Lenders’ outlook continues to be positive
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- Figure 12: Expectations of demand for buy-to-let and prime lending, 2010-15
- Spreads on buy-to-let lending fell at increasing rates during the final three quarters of 2014
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- Figure 13: Spreads on buy-to-let lending – retrospective and forward-looking, 2010-14
- Mortgage rates level out, but profit margins stay healthy
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- Figure 14: Bank of England base rate, three-month (monthly average) LIBOR and effective new mortgage rate, January 2009-November 2014
- Low base rates support demand for buy-to-let finance
- Arrears and number of repossessions in buy-to-let fall in 2014
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- Figure 15: Total number of property repossessions and buy-to-let repossessions, Q1 2013-Q3 2014
- Geared investments offer almost double return rates over cash purchases
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- Figure 16: Average net annual compound rate of return over five years – geared versus cash purchase investment, Q1 2009 – Q4 2014
- Regional variation in geared-investment returns shows North East as biggest winners, while ‘Rest of London’ yields plummet
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- Figure 17: Annual compound rates of return on buy-to-let investment over a five-year period – geared investments only, by region, Q4 2014
- Recent regulatory and policy developments
UK Housing Stock
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- Key points
- The privately rented sector accounts for over one in five UK properties
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- Figure 18: UK Housing stock, by tenure, 2009-14
- In England the number of renters overtakes the number of mortgage holders for 25-34 year olds
- New private builds improve 5% year on year but supply still falls short of demand
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- Figure 19: Number of permanent dwellings completed, by tenure – UK, 2007/08-13/14
Market SWOT Analysis
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- Figure 20: Buy-to-let mortgage market – strengths, weaknesses, opportunities and threats, 2015
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Who’s Innovating?
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- Key points
- Mainstream lenders cater for the first-time landlords
- New challengers appear
- Pepper UK
- Axis
- Fleet Mortgages
- The Post Office
- Landbay – Peer to Peer funded buy-to-let lending
- Paratus AMC launches buy-to-let products through Foundation Home Loans (FHL)
- Lenders slash rates in price wars
Market Size and Forecast
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- Key points
- New buy-to-let loans increase at record amount
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- Figure 21: Volume and value of new buy-to-let mortgages, 2008-14
- Growth in value of advances in buy-to-let was strongly driven by re-mortgage loans
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- Figure 22: Value of advances for new buy-to-let re-mortgage/new house loans, January 2014-November 2014
- Mintel expects the market to grow to £44 billion by 2019
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- Figure 23: Forecast of new buy-to-let mortgage advances – fan chart, 2009-19
- Figure 24: Figure 21: Forecast of the number of new buy-to-let mortgage sales – fan chart, 2009-19
- Forecast methodology
- Fan chart explanation
Market Share
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- Key points
- Lloyds Banking Group and Nationwide lead the market by a large margin
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- Figure 25: Buy-to-let amounts outstanding – selected lenders only, 2013-14
Companies and Products
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- Lloyds Banking Group
- Buy-to-let product range
- Market position
- Recent financial performance
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- Figure 26: Key annual financial data for LBG, 2013-14
- Recent activity
- Nationwide and The Mortgage Works
- Buy-to-let product range
- Market position
- Recent financial performance
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- Figure 27: Key interim financial data for Nationwide, H1 2013 and H1 2014
- Recent activity
- Paragon
- Buy-to-let product range
- Market position
- Recent financial performance
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- Figure 28: Key annual financial data for The Paragon Group, 2013 and 2014
- Recent activity
- Barclays
- Buy-to-let product range
- Market position
- Recent financial performance
- Recent activity
Brand Communication and Promotion
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- Key points
- Overall mortgage adspend has decreased over the past year
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- Figure 29: Total advertising expenditure on mortgage products, by sub-category, 2010-14
- Limited buy-to-let advertising
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- Figure 30: Adspend on buy-to-let mortgages, by selected advertisers and media type, 2014
Channels to Market
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- Key points
- The majority of buy-to-let providers utilise intermediaries
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- Figure 31: Distribution channels used by selected buy-to-let lenders, February 2015
- Intermediaries’ role in mortgage sales grow
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- Figure 32: Proportional distribution of regulated mortgage sales, by channel, 2010-14
Rental Property Ownership
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- Key points
- Survey background
- 6% report owning at least one rental property
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- Figure 33: Rental property ownership, December 2014
- More than one in 20 people are landlords
- People who are married are more likely to be landlords
- There are a greater number of landlords in London and the South
- Self-employed respondents are three times more likely to be landlords
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- Figure 34: Rental property ownership, by working situation, December 2014
The Impact of Pension Reform
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- Key points
- Two in five people have some form of pension provision
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- Figure 35: Ownership of investments, December 2014
- 13% of non-landlords aged over 55+ with a pension are considering investing in buy-to-let…
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- Figure 36: Non-landlords’ investment plans, by investment ownership, December 2014
- … but pension freedom is unlikely to transform the market
Buy-to-let Mortgage Ownership
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- Key points
- Roughly one in five landlords have a buy-to-let mortgage
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- Figure 37: How landlords are funding properties, December 2014
- Private rented accommodation is roughly half mortgage-funded, half owned outright
- 30% of rented accommodation is funded through residential mortgages
Reasons for Becoming a Landlord
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- Key points
- Half of all privately rented accommodation is bought specifically as an investment property
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- Figure 38: Reasons for becoming a landlord, December 2014
- Over one in five landlords let out property as a result of changes in living situation
Landlords’ Investment Plans
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- Key points
- One in 10 landlords are serious considering buying another property to add to their portfolio
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- Figure 39: Landlords’ future investment plans, December 2014
- Roughly one in 10 landlords are potentially looking to buy another property to let out
Non-landlords’ Investment Plans
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- Key points
- More than a quarter of non-landlords would consider becoming a landlord
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- Figure 40: Non-landlords’ future investment plans, December 2014
- Non-landlords from Scotland and the North West are most likely to consider investing in property
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- Figure 41: Non-landlords’ investment plans, by region, December 2014
- Almost one in five non-landlords aged 55-64 would consider property investment
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- Figure 42: Non-landlords’ investment plans, by selected age and working status, December 2014
- Disinterest increases greatly from non-landlords aged 65+ and among those already retired
- Barriers to entry for non-landlords
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- Figure 43: Non-landlords’ investment plans, by attitudes towards buy-to-let, December 2014
Attitudes towards Property Investment
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- Key points
- The hassle factor is the main barrier to investing in property
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- Figure 44: Attitudes towards property investment, December 2014
- One in four people would need a mortgage in order to finance a buy-to-let
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- Figure 45: Attitudes towards property investment among potential investors, December 2014
Appendix
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- Value forecast – best and worst case scenarios
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- Figure 46: Forecast of new buy-to-let advances – best- and worst-case scenarios, at current prices, 2014-19
- Volume forecast – best and worst case scenarios
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- Figure 47: Forecast of the number of new buy-to-let mortgages – best- and worst-case scenarios, at current prices, 2014-19
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