As the product turns 25, here’s if they’re still a good bet

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The rental mortgage marks its 25th anniversary this month, having been launched in September 1996, the year of Mad Cow Disease, when John Major was Prime Minister and England hosted the European Football Championships .

These mortgage products, specially designed for homeowners, aimed to help UK buyers caught in the real estate slump of the 1990s.

At the time, the private rental sector only represented 9% of the housing stock. But at its peak in 2016, rental loans accounted for 20% of all mortgages by value, according to the National Residential Landlords Association (NRLA).

Robert Jordan, former president of the Association of Residential Lettings Agents (ARLA), said, “We couldn’t see where we would find more homes to rent, so ARLA designed a buy-for-rent product that would allow more homes to rent. of investors to buy an investment. property and rent it out under the new regulations of the Housing Act 1988.

Nearly 3,000 rental transactions

The first two lenders approached by ARLA were Paragon and NatWest. Since then, many other lenders, both specialist and traditional, have entered the market. As of September 23 of this year, the financial comparison site Moneyfacts listed 2,987 different mortgage loan offers.

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Richard Rowntree, general manager of mortgages at Paragon, says rental loans have transformed housing. “In 1996, 2.4 million households lived in private rental housing. Today it is around 4.4 million in England, which represents 19% of UK households.

“This was up from 10 percent in 2001 and is higher than the social housing supply at 17 percent. “

The NRLA also claims that the number of private dwellings classified as “decent” by government standards increased from 53.2% in 2006 to 76.7% last year.

Renting is no longer a last resort, says the association. “The private rental sector is a tenure of choice, as well as a need, and this is supported by the diversity of those who actively choose rental housing, benefiting from the flexibility they offer. “

Hard times ahead?

Owning was once seen as a way to make a quick buck. This may have been the case for landlords in the late 1990s and early 2000s, when the 1996 Housing Act made it easier for them to rent residential. In recent years, however, the circumstances have become more difficult and are expected to become even more difficult.

Tax changes and stricter lender criteria introduced in 2016 have resulted in thousands of homeowners being sold. Mortgage payments can no longer be offset against profits, making it financially difficult for homeowners.

There are also upcoming changes in landlord legislation, which means evictions deemed “no-fault” can be challenged in court.

“Section 21 of the new housing law means that no-fault evictions will not be allowed,” said Richard Blanco, property expert and London representative of the National Residential Landlords Association. “Where an owner could give two months’ notice, he can now face a legal battle. “

He adds, “Since 2016, much stricter loan requirements have been introduced, and according to stress tests introduced by regulators, any owner with four or more properties is a portfolio owner. This means that they are subject to more checks and balances.

“But we still need rental housing. Things came to a head. But if you hold a property for 10, 15, or 20 years, you can get an average return of four percent.

Case study: We took advantage of the boom years to build our real estate portfolio

Lisa Orme is an owner from Coventry. She also runs the Mortgage Momma website and is a mortgage consultant.

Lisa Orme is a Coventry owner

“I was a medical examiner for 15 years before I and my husband, Stuart, decided we wanted more out of life than a job and a pension. Various things conspired to make ownership our vehicle of choice.

“So 20 years ago we sold a poorly performing endowment policy to allow us to buy our first property, sell it and double our money.

“We were lucky with our timing and took advantage of the boom of the 2000s, building a large portfolio of properties in the Midlands.

“Our journey then led me to create my own mortgage brokerage, Keys Mortgages, in 2009, and we also designed and patented Letterblox, a security product.

“I now provide advisory services to other mortgage advisors and real estate investors and assist homebuyers and owners. “


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