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Buy to Let

Let-to-buy booms ahead of looming red tape

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
04/02/2016

Mortgage brokers say that one in eight of their cases are now let-to-buy mortgages, as borrowers choose to let out their own home and buy another

The number of let-to-buy cases being handled by brokers is booming, with the sector accounting for a massive one in eight mortgages in the final quarter of 2015, according to a study by Paragon Mortgages.

The specialist lender found that for 10% of mortgages advisers, let-to-buy deals represent more than 30% of their business.

It also revealed that in the fourth quarter of 2015, 12% of mortgage cases were let-to-buy. This figure is up from 10.6% in quarter three.

New rules

Many let-to-buy mortgages – which enable a borrower to let their exisitng home to tenants and raise funds to buy a new home for themselves – are set to fall under statutory regulation in March, when the Mortgage Credit Directive is implemented.

They will be caught under a new regulatory category of Consumer Buy-to-Let, which will include loans where a customer has no other rental properties, and is looking to remortgage a property they have previously lived in.

Over half of brokers (60%) of brokers told Paragon that they expect the new rules to have no impact on levels of let-to-buy business, while a quarter thought it would lead to fewer mortgages being arranged.

John Heron, director of mortgages, said: “We have seen a clear uptick in the volume of let-to-buy mortgages being written in Q4 2015.

“Paragon have been working hard to ensure we are prepared for this regulatory change, so that we can continue to offer a comprehensive range of mortgage solutions for buy-to-let landlords.”