Will BTL Borrowing Take a Downturn in 2019?

Buy to let has long been a popular option for investing in property. Over the last few years, many landlords have taken out mortgages and bought properties to let out to tenants, hoping the tenants would pay off their mortgages over the coming decades.

But things are changing in the buy-to-let market, and recent government regulation has made this a less attractive investment. So is buy-to-let borrowing set for a downturn next year?

Mortgages at Lowest Level for 6 Years

According to a report in Bloomberg, property borrowing for buy to let is becoming less popular in the UK. As a share of all the mortgages, buy to let has gone down to its lowest level for six years. This data comes directly from the Bank of England.

Back at the beginning of 2016, buy-to-let borrowing was responsible for as much as a fifth of all mortgage borrowing across the UK, but it dropped considerably during 2016 and has remained at a lower level since.

Why the Fall in Buy-to-Let Borrowing?

So why has buy-to-let borrowing fallen over the last few years? It’s mainly down to the fact that the landscape has changed. This is due to increased government regulation over recent years where the government has brought in a range of new rules and taxes that have made buying a property to let to tenants less appealing.

These include the increase in stamp duty by 3 percentage points from April 2016, which has put off many potential landlords. Another big decision made by the government was to withdraw the tax relief for mortgage interest.

In addition, there are now much stricter rules on lending in place, and there is also simply a slowdown in the housing market that is partly to blame. It is the combination of all these factors that has had such a big impact on the buy-to-let market.

Mortgage Approvals to Keep on Falling

This Is Money reports that mortgage approvals will continue to fall for the next three years, and after this the market will start to stabilise again in 2021. In 2020, when the withdrawal of mortgage tax relief is complete, some landlords could find that their properties are loss-making, and the report suggests that there will be as many as 360,000 fewer mortgages approved in 2023.

2019 Might Present Opportunities for Some

However, it’s not all doom and gloom. This article in the Financial Times suggests that 2019 might actually be a good time to invest in a buy-to-let property. The theory is that a lot of landlords with unmanageable amounts of debt will be forced to sell up, and this could present an opportunity for other landlords.

House prices are still high, but as they start to fall, it could be a good opportunity for cash buyers to snap something up.

Plan Your Investment Carefully

There is no doubt that investing in buy-to-let property is very different now to what it has been in the past. But that’s not to say it is a bad investment, and it depends on your circumstances. If you are considering getting a buy-to-let mortgage in 2019, do your research very carefully and make sure you are making a wise investment.