Those statistics, they can be made to say pretty much anything.
Interesting justification for all the heat on Buy-to-Let as a sector this week, reported in today’s Bricks and Mortar supplement in The Times (essential reading for property addicts like me!):
Regulators at the Bank of England are issuing increasingly strident warnings that the mushrooming growth of buy to let, which is expanding far faster than the rest of the mortgage market, could put the wider economy at risk. It has grown by 40 per cent since 2008, while lending to owner-occupiers has increased by only 2 per cent.
Sounds pretty reasonable at first glance – our prudent banking gods protecting the world from buy-to-let landlords going mad on unbridled acquisition sprees….
Buuuuutttt, hold on, let’s examine these figures a bit:
First, this is a level of lending that’s up by forty percent….in SEVEN YEARS.
Some simple maths: to arrive at 40% over seven years requires 4.5% growth per annum compounded.
Got to say, 4.5% per annum is not an incredible, inexplicable, mad level of growth, is it? The figure of 40% increase relates to the level of outstanding mortgage lending, which has risen to 16% of all mortgage debt. So, doing the math, it has risen from 11.5% at the depths of the deepest, darkest recession in a generation, to 16% of all mortgage debt now. And as the rented property share of the market is around 16% too, I have to say it doesn’t sound much like runaway excess to me. More buy-to-let landlords must be involved than previously on the evidence of these numbers, but in a world of economic turmoil, putting investment monies into bricks and mortar is understandable.
Read the whole article here:
Which brings you to the other part of the question, and the bit that must be way more concerning: if the owner occupier loan share has only increased by a paltry 2%…in seven years, mind…then surely there’s something more fundamentally amiss in that part of the equation, isn’t there? Something is depressing those numbers (and contributing to b-t-l soaking up some of the slack, certainly), and one critical factor is the exaggerated level of lender caution relating to the Mortgage Market Review criteria. If you apply for a new homeowner loan today (or re-mortgage) the chances of being turned down at the last minute, even after an agreement in principle, is worryingly high. Perhaps you have experienced this? If so, let us know by commenting.
The same article quotes a landlord named Richard Blanco: “…Blanco believes the surge in buy-to-let lending is a result of the government’s intervention in the residential sector and shouldn’t be a cause for concern. “The Mortgage Market Review has applied the brakes too harshly on the owner-occupier market,” he says. “That’s why it looks as if buy-to-let lending is racing ahead.”
A sensible alternative view from a seasoned landlord.
Do you ever get the impression government policy is based on decisions and advice made on the hoof?