Buy-to-let mortgages: Are they still a good bet as the product celebrates its 25th anniversary?


Buy-to-let mortgages are celebrating their 25th anniversary, so here’s whether they’re still a good investment.

They revolutionized the housing market and remain a good long-term investment – but don’t expect a return to the euphoria of the 1990s.

This month marks the 25th anniversary of the buy-to-let mortgage, which was first introduced in September 1996, the year of mad cow disease and the European Football Championships in England, when John Major was Prime Minister.

These mortgage products, which were specifically designed for landlords, were intended to assist UK buyers who were caught up in the housing slump of the 1990s.

The private rented sector made up only 9% of the housing stock at the time.

However, according to the National Residential Landlords Association (NRLA), at its peak in 2016, buy-to-let lending accounted for 20% of all mortgage lending by value.

“We couldn’t see where we’d find more homes to let, so ARLA designed a buy-to-let product that would enable more investors to purchase an investment property and let it under the new Housing Act 1988 regulations,” says Robert Jordan, past president of the Association of Residential Letting Agents (ARLA).

Paragon and NatWest were the first two lenders ARLA approached, and since then, many more lenders, both specialist and mainstream, have entered the market.

Moneyfacts, a financial comparison website, had 2,987 different buy-to-let mortgage deals as of September 23 this year.

Buy-to-let lending has transformed housing, according to Richard Rowntree, managing director of mortgages at Paragon.

“In 1996, 2.4 million households rented private housing.

It now numbers around 4.4 million people in England, accounting for 19% of all UK households.

“This is up from 10% in 2001 and is higher than the provision of social housing, which is at 17%.”

According to the NRLA, the number of privately rented homes that meet government standards has increased from 53.2 percent in 2006 to 76.7 percent last year.

According to the association, renting is no longer a last option.

“The private rented sector is a tenure of choice as well as necessity, as evidenced by the diverse population of people who actively seek out rented homes and benefit from the flexibility they provide.”

Landlording was once thought to be a quick way to make money.

This could have been the situation for landlords in the late 1990s and early 2000s, when the 1996 Housing Act was enacted.

UK news summary from Infosurhoy

Buy-to-let mortgages: Are they still a good bet as the product approaches its 25th anniversary?

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Buy-to-let mortgages: As the product celebrates its 25th anniversary, here’s if they are still a good bet

Case study: We used boom years to build our property portfolio

Lisa Orme is a landlord from Coventry. She also runs the website Mortgage Momma and is a mortgage adviser.

Lisa Orme is a landlord from Coventry
Lisa Orme is a landlord from Coventry

“I was a forensic scientist for 15 years before me and my now-husband, Stuart, decided we wanted more out of life than a job and a pension. Various things conspired to make property our chosen vehicle.

“So, 20 years ago we sold a badly performing endowment policy to enable us to buy our first property, selling it and doubling our money.

“We were lucky with our timing and took advantage of the 2000s boom, building a large portfolio of properties in the Midlands.

“Our journey then took me to starting my own mortgage brokerage, Keys Mortgages, in 2009, and we also designed and patented Letterblox, a security product

” I now offer consulting services for other mortgage advisers and property investors and help homebuyers and landlords.”

Read More - Featured ImageLisa Orme is a landlord from Coventry

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