older_couple buy-to-let

The truth behind the fall in new buy-to-let lending to older borrowers

This week, new research claimed that buy-to-let lending to those aged 55 and over was down by 53%, but there could be more to the story if you look at recent trends.

New figures released by UK Finance this week revealed that new buy-to-let mortgages for the older age bracket had “fallen off a cliff” in the last three months of 2023, after the number of new mortgages being taken out by over-55s more than halved compared with a year previously.

The data found that there were 7,980 buy-to-let mortgages or remortgages taken out by borrowers in this age group in the final quarter of last year. The number of new homeowner mortgages for over-55s also fell by 37.1% in the same period, to 29,060.

More figures were found to be down during the period, according to UK Finance, including the number of retired people with mortgages (-30.56% in 12 months) and retirement interest-only mortgages (-43.3% in 12 months). However, with 2023 being a year marked with uncertainty, the whole housing market is reported to have slowed down over the period, with reports that it has begun to pick back up in 2024.

According to comments from Sarah Coles of Hargreaves Lansdown, this decrease could indicate fewer older landlords remaining in the market, noting that they could be selling up in greater quantities than they are buying or remortgaging.

However, there are other trends at play at the moment that could be affecting the figures:

More limited company landlords

A recent report from Hamptons revealed that a record 50,004 limited companies for buy-to-lets were set up last year across the UK, up from the 48,540 set up in 2022. However, the number of new limited companies being established accelerated towards the second half of the year, meaning 2024 is likely to see even more buy-to-let landlords incorporate.

The figures from UK Finance looking at specific age groups of buy-to-let borrowers do not take into account mortgages held or properties owned by limited companies, and the fact that this number is on the rise could be linked to a fall in new borrowing for over-55s.

At the start of 2024, according to Hamptons, there were 345,426 limited companies holding buy-to-lets in the UK, which was 11.6% higher than the start of 2023.

Cash investors in buy-to-let

Since interest rates and mortgage rates began to climb, there has been a steady increase in the number of cash buyers coming to the UK property market. This includes national and international investors, from homebuyers to buy-to-let investors.

Although rates have been coming down slowly, they remain high, meaning that those who are able to invest using cash rather than borrowing are likely to remain more inclined to do so. Particularly for portfolio property investors who may have made strong capital gains on some of their older investments, selling up and reinvesting in cash could be a popular choice at the moment.

Paying off mortgages

Many homeowners and buy-to-let landlords have been concentrating on paying down their mortgages over the past couple of years, as climbing rates have meant higher costs. This means new borrowing for over-55s is likely to have been affected by those who have paid off enough to be mortgage-free.

Property investment has long since been a popular retirement plan, and this remains the case. It is common for buy-to-let landlords to own their properties with interest-only mortgages, and the property is then sold for a profit when the term comes to an end or when the owner reaches retirement.

Of course, higher mortgage rates along with tax changes that may have affected many buy-to-let landlords will have deterred some from the market. Statistics show this is more likely to be the case for small landlords with only one or two properties, rather than portfolio buy-to-let investors with diversified property collections.

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