Buy to let has been buzzing lately with speculation about what is likely to happen to the market as the new tax rules bite.
One landlords association reckons landlords will flog 500,000 homes to beat the tax changes, while other research suggests most landlords can ride out the storm because they have cash flow built into their finances.
The common thread is most pundits have a political or financial thread to their arguments.
In an effort to give an independent view, bank and buildings society trade body the Council of Mortgage Lenders has attempted to draw some assumptions from buy to let data.
Bearing in mind CML members also make money out of buy to let, here are four observations they make about ‘market myths’:
- Landlords are borrowing less than first time buyers – 70% of a property’s value against 75% for FTBs.
- Buy to let borrowing is interest only – About 75% of borrowing is interest only but only around a third of buy to let homes are mortgaged
- Landlords will make tenants pay when mortgage rates go up – Most landlords have fixed rate mortgages at below market rates and many have factored rate rises into their cash flows. The CML reckons many landlords have financial plans that will allow them to absorb rate increases
- Accidental landlords are driving the buy to let market – No data shows whether a landlord is amateur or professional but at least three-quarters of new borrowing is going to landlords who already own at least one buy to let home.
“Whatever people say about buy to let, we think their arguments should be better informed and based on fact, which is why we have released this data,” said a CML spokesman.