Demand for buy to let mortgages from landlords appears to remain strong. Many landlords have no intention of selling their property. In fact in a recent survey by The Association of Residential Letting Agents (ARLA), 40% said they would continue investing in 2008. The survey had been carried out after the liquidity crisis had begun and therefore those questioned had already digested the current situation of tighter lending criteria and weaker prospects for the housing market.
The tougher lending criteria in the buy to let sector means lower loan to value (LTV) ratios and higher required rental cover on interest payments. However rental demand is now very strong and is being boosted by delayed purchases and people who have sold properties recently.
Landlords are also optimistic at the moment as they see the current situation as a buying opportunity as they can drive a harder bargain while negotiating new purchases but also they are able to command higher rents.
It has been reported that rents rose on average 6.3% in the 3 months to November 2007 which would equate to an annualised rate of 28%. Even with flat house prices this means that yields are set to grow. Void periods are also likely to be few and far between with landlords on average finding tenants in less than 2 weeks.