Table of Contents
Executive Summary
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- The market
- Buy-to-let market enjoys highest level of activity since 2007 crisis
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- Figure 1: Forecast of new buy-to-let mortgage advances – fan chart, 2010-20
- Three fifths of all buy-to-let lending is to re-mortgagors
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- Figure 2: Breakdown of buy-to-let house purchase and re-mortgage lending, 2010-15
- Intermediaries dominate mortgage sales
- Companies and brands
- Lloyds Banking Group continues to dominate the market
- Technology strengthens communication channels and boosts efficiency
- The consumer
- The proportion of landlords among adults has not grown in the past year
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- Figure 3: Ownership of rental property, December 2015
- 32% of landlords are using a buy-to-let mortgage
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- Figure 4: Buy-to-let mortgage ownership, December 2015
- Only two in five landlords fully understand the tax relief rule change
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- Figure 5: Landlord awareness and understanding of tax relief rule change, December 2015
- 16% of landlords plan to sell one or more of their rental properties within the next 12 months
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- Figure 6: Rental property plans for the next 12 months, December 2015
- 91% of retirees would not consider becoming landlords
- What we think
Issues and Insights
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- Targeted products are needed for more complex landlords
- Facts
- Implications
- Non-landlords should be targeted before they reach age 45 if they are to be persuaded to invest in rental property
- The facts
- The implications
- Too much government regulation comes at the price of tenant protection
- The facts
- The implications
The Market – What You Need to Know
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- Buy-to-let market enjoys highest level of activity since 2007 crisis
- Three fifths of all buy-to-let lending is to re-mortgagors
- Intermediaries dominate mortgage sales
Market Size and Forecast
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- 2015 saw highest lending since 2007
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- Figure 7: Total value of buy-to-let gross lending per year, 2007-15
- Volume of new BTL mortgages increased by 27% in 2015
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- Figure 8: Volume and value of new buy-to-let mortgages, 2007-15
- Demand for buy-to-let lending reached peak level in Q3 2015
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- Figure 9: Demand for buy-to-let and prime lending, 2011-15
- Rate of growth of new advances expected to slow
- Re-mortgage activity expected to grow
- Buy-to-let mortgage lending expected to reach £48.7 billion in 2020
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- Figure 10: Forecast of new buy-to-let mortgage advances – fan chart, 2010-20
- Figure 11: Forecast of new buy-to-let mortgage advances, at current and constant prices, 2010-20
- Forecast methodology
Market Segmentation
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- Three fifths of all buy-to-let lending is re-mortgage business
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- Figure 12: New mortgages by purpose of loan, not seasonally adjusted, 2010-15
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- Figure 13: Breakdown of buy-to-let house purchase and re-mortgage lending, 2010-15
Channels to Market
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- Intermediaries dominate mortgage sales
- Technological developments improve intermediary channel
Market Drivers
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- The privately rented sector accounts for one in five UK properties
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- Figure 14: UK housing stock, by tenure, 2009-15
- BTL provides stronger yields and capital growth in a low interest rate environment
- Increased housing supply is not enough to curb house price inflation
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- Figure 15: Number of permanent dwellings completed, by tenure – UK 2007-15
- Private housing rental price growth shows no signs of slowing
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- Figure 16: Index of private housing rental prices, January 2011 – December 2015
- Landlord confidence crisis
- Spreads on buy-to-let lending fell during the final three quarters of 2015
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- Figure 17: Spreads on buy-to-let lending, 2011-15
- The impact of the pension reform
- The rise of crowdfunding in the property sector
- The threats and opportunities of alternative markets
- The looming EU referendum and its impact on the buy-to-let market
- HMRC rolls out new digital tax services
Regulatory and Legislative Changes
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- Concerns about financial stability prompts market intervention
- Stamp Duty Land Tax (SDLT) surcharge comes into effect in April 2016
- Buy-to-let tax relief restrictions phased in from April 2017
- Changes to the wear and tear allowance take effect in April 2016
- Smoke alarm rules were implemented on 1 October 2015
- The European Mortgage Credit Directive (MCD) came into effect on 21 March 2016
- Buy-to-let lending community adopts statement of practice
- Financial Policy Committee requests power to regulate buy-to-let mortgage lending
- Proposed new rules by the Prudential Regulation Authority (PRA)
- Changes to Capital Gains Tax in 2019
- The BCBS consultation paper comes into force in 2019 at the earliest
Key Players – What You Need to Know
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- Lloyds Banking Group continues to dominate the market
- Technology strengthens communication channels and boosts efficiency
- Advertising expenditure for buy-to-let more than tripled in 2015
Market Share
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- Lloyds Banking Group continues to dominate the market
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- Figure 18: Buy-to-let amounts outstanding – selected lenders only, 2013-15
- Santander market share growth is substantial
Competitive Strategies
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- Tightening criteria and amending affordability calculations in line with new risks
- Lenders increase rental and interest cover ratios
- Lenders increase maximum loans and loan-to-value rates (LTVs)
- Santander introduces two-tiered tests
- TSB Intermediary introduces a minimum income
- Woolwich makes affordability check holistic
- New Street Mortgages offers differential rental calculations depending on region
- Providers target different landlord categories
- HSBC opens up buy-to-let to non-customers
- NatWest begins targeting professional landlords and accepts selective licence applicants
- Pepper UK targets landlords with a less than perfect credit history
- Lenders target older landlords by increasing age caps
- Revamping product ranges to remain competitive
- Speed, efficiency and transparency boosts
- New Street Mortgages provides instant and reliable decision-making with full transparency
- NatWest introduces earlier valuation instruction
- Paragon Group diversifies funds with Paragon Bank to invest in booming buy-to-let business
- Preparations for the European MCD
Launch Activity and Innovation
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- Limited Company and Consumer BTL products
- Communication is key
- Mortgage marketplaces offer an alternative way of investing in property
Advertising and Marketing Activity
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- Total BTL ad spend more than triples over the past year
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- Figure 19: Total above-the line, online display and direct mail advertising expenditure on buy-to-let mortgages, 2014-15
- NatWest accounts for 76% of 2015 total BTL adspend
- Press still dominates as advertising channel for this market
- Nielsen Media Research coverage
The Consumer – What You Need to Know
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- The proportion of landlords among adults has not grown in the past year
- 32% of landlords are using a buy-to-let mortgage
- Only two in five landlords fully understand the tax relief rule change
- 20% of landlords’ future plans have been affected by the stamp duty change
- 16% of landlords plan to sell one or more of their rental properties within the next 12 months
- 91% of retirees would not consider becoming landlords
Rental Property and Buy-to-let Mortgage Ownership
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- 6% report owning at least one rental property
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- Figure 20: Ownership of rental property, December 2015
- Self-employed respondents are three times more likely to be landlords
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- Figure 21: Rental property ownership, by working situation, December 2015
- 55-64-year-olds are most likely to own multiple buy-to-let properties
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- Figure 22: Rental property ownership, by age group, December 2015
- One third of landlords have a buy-to-let mortgage
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- Figure 23: how landlords are funding properties, December 2015
Awareness and Understanding of Tax Relief Change
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- Only two in five landlords fully understand the changes to tax relief
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- Figure 24: Awareness and understanding of the change to the tax relief rule, December 2015
- Providing guidance to boost confidence
The Impact of the Increase in Stamp Duty Rates
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- 17% of landlords have not heard about the change to stamp duty rates
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- Figure 25: Impact of the 3% surcharge on stamp duty rates, December 2015
- 20% of landlords say that their future plans have been affected by the changes to stamp duty
Landlords’ Plans for Next 12 Months
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- 16% of landlords plan to sell one or more of their rental properties
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- Figure 26: Rental property plans for the next 12 months, December 2015
- Majority of landlords look set to be inactive in the next year
- Some landlords will seek advice on rental property management
Appetite for BTL Property Investment
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- Attractiveness of rental property investment remains relatively constant
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- Figure 27: Non-landlords’ future investment plans, December 2015
- Younger adults are more open to the idea of becoming a landlord
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- Figure 28: Proportion of non-landlords who would consider investing in property to let, December 2015
- 91% of retirees would not consider becoming landlords
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- Figure 29: Appetite for buy-to-let property investment, by working situation, December 2015
- Those buying a home are more than twice as likely to consider becoming landlords than those who own homes outright
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- Figure 30: Proportion of non-landlords who would consider investing in property to let, by housing situation, December 2015
Barriers to Rental Property Ownership
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- 40% think that buying an additional property to rent out is too expensive
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- Figure 31: Barriers to rental property ownership, December 2015
- 24% do not have time to be landlords
- 13% prefer easy-access savings or investments options
- 45-54 year old males show more engagement with property market forces
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- Figure 32: Barriers to rental property ownership, December 2015
Appendix – Data Sources, Abbreviations and Supporting Information
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- Products covered in this Report
- Abbreviations
- Consumer research methodology
Appendix – Market Size and Forecast
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- Forecast – Mortgage advances
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- Figure 33: Best and worst forecast for buy-to-let mortgage advances, 2015-20
- Forecast – Volume of mortgages
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- Figure 34: Forecast of number of new buy-to-let mortgage sales – fan chart, 2010-2020
- Figure 35: Forecast of number of new buy-to-let mortgage sales, at current and constant prices, 2010-2020
- Figure 36: Best and worst forecast for buy-to-let mortgages by volume, 2015-20
- Forecast Methodology
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