The director of the Intermediary Mortgage Lenders Association (IMLA) is against the Bank of England’s (BoE) warnings about the risk of the booming buy-to-let market.
In its Financial Stability Report, the BoE cautioned that buy-to-let could pose a threat to the UK economy, as many more pensioners are expected to use the new pension rules to enter the private rental sector.
However, the IMLA’s John Heron says that buy-to-let lending was at a record high of £45.7 billion in 2007, but even after the recent recovery in the housing and financial markets, it is only forecast to reach £30 billion this year.
Heron states: “The BoE’s comments on buy-to-let are based on their observation of strong growth in lending in recent years. It should be understood, however, that while there has been substantial growth, this has been from a low base post-crisis, and lending today is still no greater than it was ten years ago and is well below the levels achieved before the crisis in 2007.
“The rising cost of homeownership is among many factors driving demand for rental properties, including the fall in social housing, changing work patterns, growing numbers of students, high levels of immigration, later marriage and rising separation rates.”
He concludes: “Housing needs are changing and, in fact, the IMLA analysis shows fewer than one in three extra properties to enter the private rental sector since 2007 have been backed by a buy-to-let mortgage. Lending has therefore been responding to, rather than leading, demand.”1