A Bright Future for Buy to Let
NLA Mortgages
Andrew Rudkin
www.landlords.org.uk
To promote and protect private residential landlords
Agenda
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Introduction
Is this a good time to be a Landlord?
The BTL marketplace
Looking forward
Paragon Mortgages / Mortgage Trust
NLA Mortgages
Summary and Questions
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Introduction
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Provided by TBMC Group
Award winning specialist broker and distributor
Systems and expertise
Paragon Group
www.landlords.org.uk
To promote and protect private residential landlords
4
Owner-occupation and social renting in
decline
Owner-occupiers and social renters
• UK owner-occupation
%
• Social housing fallen to
%
peaked at 69.7% in
2002 – fell to 64.7% by
2011
18.1% from 24.4% in
1993
• Social housing peaked
at 30% in 1971
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Source: DCLG
5
Owner-occupation and social renting in
decline
UK private rented sector
PRS currently accounts for 17.2% of
housing stock in the UK
Savills forecasts PRS will account for 27%
by 2020
PRS is the only growing housing tenure
Forecast to grow to 5.8 million by 2018
Provides vital accommodation for diverse
range of tenants, including mobile workers,
young professionals, students, economic
migrants
1988 Housing Act
000s units
- increased by 93% since 2001
4.7 million (more than one in six) properties
BTL introduced
Important social role - housing people on
low incomes, with 25% of PRS in receipt of
Housing Benefit
Makes an important economic contribution
UK PRS worth £500 billion - larger than UK
commercial property sector
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Source: DCLG/CB Richard Ellis/Savills
Why is now a good time to be a
landlord?
• Property Prices.
• Average current property prices up 7.1% on 2012
• Future property prices? ...forecasts reflect continued
steady growth.
• Supply & demand – current shortage of around 1 million
homes in UK.
• New housing remain at low levels
• Normally around 175,000 units per annum
• 142,000 completed in 2011
• Need to build 240,000 new homes each year
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Why is now a good time to be a
Landlord?
• 1.8m people currently on council house waiting lists in
England
• Up 10% over last 5 years
• Increasing Rents.
• Average rental return of 5% for houses and 5.2% for
flats
• 39% of landlords increased rents in Q4 2013
• Outlook for Private Rented Sector.
• PRS is growing –
• up from 10.1% of housing stock in UK to 17.2% in 2011
and predicted to increase to 27% by 2020 (Savills)
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Why is now a good time to be a
Landlord?
• Tenant Demand Remains Strong
• Mortgages for first time buyers still difficult with stringent
underwriting criteria
• Growing student population.
• Growing immigrant population.
• Mobile workforce.
• Split families.
• Personal choice...movement towards European market?
• Average void period – 3 weeks
• 46% of ARLA agents reported more tenants than
properties
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The Buy to Let Marketplace
The BTL marketplace
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10
Lenders
Impact of financial crisis
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Competition vastly reduced
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Market dominated by two lenders
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Criteria more restricted
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Higher gross margins reflect high cost
of funds and capital
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Particular shortage of products for
professional landlords
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BTL seen as low risk / higher margin
opportunity for lenders
Recovery
•
More lenders/more funding/more
products
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Underwriting more flexible and criteria
improving
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Lloyds and Nationwide still dominate
To promote and protect private residential landlords
Buy to Let Lending
• The Buy to Let Marketplace
Total Market
BTL Market % Share
Total Market
BTL Market
% Share
2007
£360bn
£45bn
12.6%
2011
£140bn
£14bn
10%
2012
£143bn
£16.4bn
11.5%
£20bn
11.7%
2013 (estimate) £170bn
• Estimated natural Buy to Let mortgage market - £25bn - £30bn
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Buy to Let Lending
Majority of lenders impose stifling aggregate lending limits
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Lenders and their approach to market
• Only a few specialist BTL lenders cater for
the professional landlord sector - Paragon,
Aldermore, Kent Reliance and TMW.
• What differentiates the professional sector?
• HMOs and multi unit properties
• Variety of tenant types (including DSS and
students)
• Larger portfolios
• Limited company lending
• More complicated underwriting propositions
• Larger lending limits
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Buy to Let
Looking forward
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The Buy to Let Marketplace
• Continued recovery in 2014 with more lenders
• Concentration on mainstream buy to let
• There are now 30 plus lenders offering a wide range of
products
• Overall Buy to Let lending has proven to be very resilient
during the crises with many lenders reporting lower arrears
than residential mortgages
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The Buy to Let Marketplace –
looking forward
• Mortgage products:
• More choice – fixed rates/discounts/trackers
• Easing of rental requirements
• Increase in available products
• Over 2000 products available in 2007
• Down to less than 80 in 2008
• Over 400 products now available and expected to
increase
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The Buy to Let Marketplace –
looking forward
• Paragon Mortgages
• Professional landlords
• HMOs – 3 years experience as a landlord
• Multi Unit properties – max 20 units, 3 years experience
• Limited company Lending
• Under 6 month ownership remortgages
• Portfolio lending up to £5m
• Lending up to 75% LTV
• Maximum loan £2m per property
• No restriction to number of properties in a portfolio
All the above difficult to place elsewhere!
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The Buy to Let Marketplace –
looking forward
• Wide range of acceptable tenancies
• ASTs (6-12 months)
• Student and Housing Benefit tenants
• Company lets (up to 3 years)
• Local Authorities and Housing Associations (up to 5 years)
• New Build
• Experienced “In house” surveyors
• Rental calculation assessed on individual or joint tenancy
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The Buy to Let Marketplace –
looking forward
• Mortgage Trust
• Simple BTL product range
• Simple application process, immediate decision
• Competitive rates
• Standard properties, single ASTs
• Available through NLA mortgages
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NLA Mortgages
• Bespoke mortgage service for NLA members
• Whole of market offering
• Currently 30 Lenders with close to 400 products
• Self select from a web based sourcing system
• Cash back incentive on all products available for NLA
members only
• Website – www.nlamortgages.co.uk
• Helpline – 02920 695 555
www.landlords.org.uk
To promote and protect private residential landlords
www.landlords.org.uk
To promote and protect private residential landlords
Summary
• Private rented sector will continue to grow and is a vital part
of housing infrastructure in the U K
• BTL is good business for Lenders but a specialist area
• Traditional & new Lenders will emerge into the market
• More products and special deals will become available
• Still a good time to be a Landlord
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Questions
Questions
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