Buy-to-Let investment by Britain’s landlords reaches a staggering total.
Ten years ago, less than 10% of Britons lived in privately rented accommodation. Today, 18% do and on current projections this could grow to 25% or even one-third in the coming years.
In 2013 private renting overtook social housing as a means of accommodating those in the supported housing sector. In other words, private landlords are increasingly taking on the mantle of housing people in need, and consequently the taxpayer funded Housing Benefit bill is rising, but conversely the cost to local authorities must be falling.
In 2003-04, 722,000 households in the private sector claimed housing benefit. Now some 1.7 million do (that’s 6.5% of all UK households*) and the total bill is around £9.5bn.
Investment by private landlords is now providing much needed social housing, consequently the combined cost of buy to let (BTL) mortgage repayments over the last 12 months is £21.9bn, that’s according to the one of the UK’s leading landlord associations.
Research carried out by the National Landlords Association** (NLA) reveals that approximately one million (1.05m) landlords in the UK have some form of BTL borrowing, with the average cost of their mortgage repayments in the last year set at £20,950.
The NLA says: “The staggering figure, which excludes upfront deposits of typically 25 per cent of property value, emerges shortly after the Bank of England announced a high of £8bn of BTL lending in quarter three of 2014.”
The NLA’s findings show that those landlords with smaller portfolios (1-4 properties) spent an average of £10,335 on repayments last year, compared to £55,285 spent by those with larger portfolios (11 or more properties).
On average it is taking six weeks for a landlord to secure a BTL mortgage, with one in five (19 per cent) landlords taking over two months to complete their BTL application.
Carolyn Uphill, Chairman, NLA said:
“These figures really hammer home just how much money private landlords put into providing much needed homes for the UK’s estimated nine million renters, especially if we consider that such a large proportion are single-property or smaller portfolio landlords.
“The majority of private individual investors are keeping a supply of well-maintained homes on the market when previous governments have failed to incentivise or stimulate more housing and social housing has been in long term decline.
“There’s no sign of either of these issues letting up anytime soon so is it any wonder that BTL lending is at an all-time high? It’s hard to imagine exactly where all this investment would come from if landlords weren’t financing housing to such an extent.”
The NLA is also reminding landlords to prepare for future rises in interest rates and has produced new guidance about dealing with the issue in order to minimise the effect it has on their lettings business.
The guidance is available as part of the NLA’s latest campaign: Rent Risk Resolve
* According to Money Week some 17% of UK households live in council houses, so in all, some 23-24% of the total number of UK households live in taxpayer-subsidised accommodation.
** NLA Landlord Panel – Q3 2014 (1079 respondents)