Salient to Investors:

  • Economists say a rise in interest rates or falling prices could repeat the record high repossessions of private-landlord homes after the 2008 financial crisis. 1 in 3 economists predict an increase this year in the BOE rate.
  • The BOE’s loan-to-income cap does not apply to buy-to-let, the fastest-growing type of mortgage by value. Rob Wood at Berenberg Bank said this was a mistake because buy-to-let is a way to speculate on rising house prices, and the small-landlord market could rise more after April 2015; when pensioners will be released from having to invest their retirement savings in an annuity.
  • Buy-to-let lending rose 19-fold in the decade through the end of 2007, while UK home values tripled.
  • The National Landlords Assn said amateur landlords were a record 72 percent of the buy-to-let industry in Q1 2014, versus 62 percent two years prior.
  • The Council for Mortgage Lenders said private-landlord mortgages in April were up 57 percent from a year earlier, while homes bought as rentals were 14 percent of all new mortgages in Q2.
  • Huw Van Steenis et al at Morgan Stanley said buy-to-let investors in Q2 had more than 10 times the impact on prices versus the UK’s Help-to-Buy lending assistance program. London Central Portfolio estimates almost 50% of the new homes bought in London in 2013 were buy-to-let.
  • David Whittaker at Mortgages for Business expects the BOE to opt for a “light-touch regime” to private rentals because you have to differentiate the amateur who needs protecting from himself and someone who owns 1,000 properties.
  • Howard Archer at IHS Global Insight said there is a desire to have a decent amount of properties available to rent because many people cannot afford to buy houses.

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