Buy-to-let mortgages turn 25 today (24th September) and can celebrate helping to transform the private rented sector since they launched in 1996 for landlords.
The then Association of Residential Landlords (now Propertymark) came up with the idea and worked with a small group of lenders to develop a mortgage product specifically tailored to landlords. It hoped to facilitate and encourage investment in a climate of growing tenant demand and a critical shortage of homes in the recession-hit housing market.
ARLA Propertymark past president, Robert Jordan (pictured), recalls that the housing market was at a low ebb in the mid-‘90s; houses weren’t selling, which meant many people were letting their homes to move to a new property.
“When the housing market picked up, those properties sold and there was a need for more rented properties to fill the gap for tenants, but we couldn’t see where we would find more homes to let,” says Jordan.
“It became clear that the mortgage options weren’t suitable, so together we designed a product, buy-to-let, that would enable more investors to purchase an investment property and let it under the new Housing Act 1988 regulations. Paragon and NatWest were the first two mortgage lenders we approached.”
Richard Rowntree (pictured), Paragon MD for mortgages, adds: “Since being launched as a mortgage product specifically designed for landlords 25 years ago, buy-to-let finance has helped to transform the PRS. It is now a vital component of the UK’s housing provision, with renting no longer a last resort.”
The PRS has almost doubled in size during the last 25 years, expanding from 2.4 million to 4.4 million households in England, accounting for 19% of UK households. The portion of homes in the sector classed as ‘decent’ under government standards has jumped from 53.2% in 2006 to 76.7% last year, while there has been a 272% rise in PRS homes with an energy rating of C or above since 2009, to 1.8 million.