Social shifts to bolster buy-to-let mortgages

• Mortgage lenders are generally agreed that the buy-to-let sector of the market is likely to continue to grow, as more people choose to rent for longer.
• High house prices outstripping earnings may be one factor keeping young first-time buyers (FTBS) off the property ladder, but there is also a perception that a mortgage is one more commitment that today's younger generation can well do without.
• Determined to stay free and flexible for longer, the Office for National Statistics (ONS) published data showing that between 1986 and 2004 the number of couples cohabiting instead of tying the knot increased from 11 per cent to 24 per cent among men and from 13 per cent to 25 per cent among women.
• And although the number of households predictably increased, the average size of a UK household dropped from 2.9 people to just 2.4 between 1971 and 2005.
• The figures reflect that more of us are choosing to live alone, while starting smaller families and fewer doing that, in recognition that our circumstances and preferences are likely to change in the future.
• Malcolm Harrison, spokesperson for the Association of Residential Letting Agents (ARLA), said that this social shift has made property a profitable investment, with landlords able to pocket higher yields and increase their portfolios in the knowledge that they are unlikely to have many void periods where the property stands empty.
• "There is no longer the social imperative to buy. People don't think that you are strange to rent. People marry much later and get divorced more often," he said.
• "The average age of buyers is now 33 years," he added.
• Indeed, the popularity of property available to rent in exciting and attractive areas was confirmed this week by the latest figures to come from the Council of Mortgage Lenders (CML).
• The industry body said that 130,400 buy-to-let loans were issued in the second half of 2005, an increase of 39 per cent on the first half of the year in spite of the traditional slower seasonal period. With higher house prices the value of these loans increased further still, rising 47 per cent to £14.6 billion.
• However, the CML also noted that the figures were probably boosted by lenders' increasing willingness to lend a higher percentage of a property's value in a buy-to-let deal, sometimes as much as 85 per cent loan-to-value (LTV).
• Nevertheless, in spite of the government's attempts to get more people onto the property ladder, the demand for rental property shows no sign of letting up in the near future.
• Coupled with the demand for greater flexibility and a reluctance to be seen as "settling down", earlier this month Paragon Mortgages identified increased immigration as another important factor behind the trend.
• With the recent expansion of the EU in 2001, the lender's trends survey found landlords optimistic, 47 per cent believing their business would benefit from more inward immigration, particularly from Eastern Europe.