Long Term Effects of Funding for Lending on Landlord & Rental Property Investments

Online, February 1, 2013 (Newswire.com) - The lettings industry has grown significantly over the last five years due to what is often dubbed 'the perfect storm' for landlords and buy to let investors. Constricted mortgage lending available for first time buyers, continued upward pressure on housing, increasing average rents, historically low interest rates and falling house prices have all contributed to create very favourable conditions for landlords and property investors.

Many landlords are also taking advantage of the stagnant housing market to expand their property portfolio by releasing equity from existing housing stock to fund new purchases, which is also likely to help lower the landlords' tax bill!

Once again, the lettings industry is booming and it looks like everyone involved in the lettings industry is set to experience another year of positive growth.

Landlord and property investors do have one other thing to consider this year, as the government's 'Funding for Lending Scheme' [FLS] starts to filter through to provide more affordable mortgage lending. But who is benefiting from this?

There are several opinions on this.

'Funding for Lending' is essentially cheaper credit the banks have access to, guaranteed by the government (the tax payers), the intention of this cheaper credit is for banks to pass this on to customers to kick start lending. Despite the banks being frequently criticised for using this funding for bolstering their own balance sheets, there is some good indications that some funding is starting to filter through to the end users - customers and businesses. With this funding now starting to take effect, it might be worthwhile to consider the likely outcomes this could have on the lettings industry.

From a landlord's point of view, FLS has enabled banks to drop their interest rates across the range of mortgages they offer - including many buy to let mortgages. This is a direct and expected result of the scheme, which is good news for landlords.
"Since the FLS was launched in August, fixed buy-to-let rates have been falling. The average rate across the top ten lowest rates for two-year fixed deals is 3.35 per cent compared to 3.69 per cent a year ago."

Rachel Springall, financial expert at Moneyfacts, says the average buy-to-let fixed rate is one of the lowest it has recorded since June 2007.

Kevin Gibson from Ascot Mortgages says "Now is a good time for landlords to look at remortgaging their buy to let properties (http://www.ascotmortgages.co.uk/btl-remortgage-deals) or move multiple properties to a buy to let portfolio mortgage. These can offer big savings. For landlords requiring more flexibility to buy further housing stock it's worth asking us about buy to let mortgages without any early repayment charges, giving you the option to sell on or remortgage without penalty."

The Council of Mortgage Lenders reports that the number of mortgages available for first time buyers has increased by 24percent since the same time last year. This has resulted in an increase in activity among home owners contributing to a 6percent increase in the number of mortgages provided. The Bank of England corroborates the statement showing an easing of the strict mortgage conditions for first time buyers.

For the first time since the credit crunch, first time buyers may start to be serious contenders for first step housing stock, which is also the most popular type of housing that landlords look to buy.
Will 2013 slowly seeing the return of the first time buyer to the UK mortgage market, or are landlords and property investors set to enjoy another year of relatively relaxed property buying?

For further reading This Is Money looks at how the increase in buy to let funding has been influenced by cheap credit by FLS:
http://www.thisismoney.co.uk/money/mortgageshome/article-2270081/Buy-let-mortgage-rates-tumble-year-low.html