The private rental sector in the UK has been revived by the buy to let mortgage which has enabled property landlords to blossom, it is claimed.
Buy to let was officially launched by the Association of Residential Letting Agents on 24 September 1996 at the RAC Club in Pall Mall, London.
The launch was an industry wide initiative and included several founder lenders, including Paragon Mortgages and Mortgage Trust, and industry bodies, including the Council of Mortgage Lenders.
Now 15 years on, Paragon is one of the UK’s leading buy to let lenders and has £8.5 billion of buy to let assets under management.
‘Buy to let has galvanised the rental market over the past 15 years, whilst providing an attractive asset class for property investors. Buy to let finance was the catalyst for the revitalisation of the modern private rented sector,’ said Nigel Terrington, Paragon Group chief executive.
‘The flow of fresh capital modernised a tired and decaying sector, driving up standards of accommodation and choice for tenants. Many argue that the PRS would have died without buy to let as it had fallen to around 7% of all housing by the early nineties and there was a lack of finance going into the sector,’ he explained.
‘The PRS now provides a home for nearly one in six households and its importance will increase in future years as population growth and housing completions diverge. More people are choosing to live in rented accommodation and we must ensure that they have a PRS that remains fit for purpose. The future strength of the buy to let market will be central to that,’ he added.
Terrington also pointed out that PRS makes a considerable contribution to the UK economy.
‘It facilitates labour mobility and flexibility, provides an income to thousands of small businesses, supports a number of associated industries, such as letting agents and maintenance companies, oils the wheels of the housing market and makes a great contribution to the public purse,’ he added.
The value of outstanding buy to let balances has risen from £5.4 billion in 1999, the first year the CML recorded the data, to £154.5 billion today. Buy to let represents 12.4% of total mortgage outstanding balances.
Since the beginning of 1999, 2.1 million buy to let loans have been advanced and there are currently 1.3 million loans outstanding. The number of properties in the PRS in England has risen from 2.1 million in 1996 to 3.9 million in 2010.