Mortgages for Business has forecast that buy-to-let lending will reach £25 billion by the end of next year.
This would represent a 25% increase on lending in 2013.
Lending to buy-to-let investors is now 135% higher than the nadir of 2009 (£8.5 billion) but remains below the 2007 peak of £45 billion.
Mortgages for Business polled 278 property investors and found that across all levels of property investment 57% of landlords intend to expand their portfolios over the next six months. The findings also showed that the landlords with the most properties already in their portfolio are the most likely to expand in early 2014.
Of landlords who already own between one1 and 10 properties – often classed as part-time landlords – 54% intend to expand over the next six months. Of those with more than eleven properties – traditionally seen as professional landlords – 66% intend to bolster their portfolios in the New Year.
In addition, 64% of landlords who intend to expand their portfolios will need to refinance in order to fund this expansion. 59% of part-time landlords say they will need to refinance to fund their expansion while 72% of professional landlords will need to refinance.
In contrast, only 7% of all landlords say they intend to shrink their portfolios over the next six months.
David Whittaker (pictured), managing director at Mortgages for Business, said: “Despite easing conditions for owner-occupiers and first-time buyers, the prevailing conditions mean the private rental sector remains a vital element of the housing mix. The growth in lending to property investors is proof of this and the intention of landlords to expand further demonstrates that demand for rental property shows little sign of waning.”
Investment in vanilla residential buy to let property is the most popular property type among investors looking to expand in over the next six months with 84% of landlords intending to target these properties.
Among the more complex property investment options, the most popular property types are Houses in Multiple Occupation – 20% of investors intend to purchase HMOs, and Multi-Unit Freehold Blocks, with 14% intending to buy these property types. Fewer investors plan to buy semi-commercial property (11%) and commercial property (9%).
However, over two thirds of property investors feel lenders could do more to support them. By far the biggest challenge that landlords say they face from lenders is their lending criteria, 60% of investors feel lenders need to ease their criteria to support the market. Specifically, investors would like to see lenders remove non-property related income requirements, increase the LTV threshold and increase the number of products available at higher LTVs as well as reduce the amount of computer-based lending decisions.
Whittaker added: “The appetite for expansion is large among property investors. Yields are strong, property prices are rising and demand from tenants shows little sign of slowing. As a result it’s poor that so many landlords feel lenders are not doing enough to help them. This will be emphasised even further if the Bank of England confirms that buy to let lending will be left out of the new slim-line Funding for Lending scheme.”