With savers receiving poor returns from banks and building societies, thousands of people unsurprisingly continue to turn to residential property as a means of supplementing their income, supported by low mortgage borrowing rates, solid demand from tenants and stable yields, as buy-to-let consolidates itself as the investment of choice.

Despite a challenging few years for the buy-to-let market, characterised by tax and regulatory changes, investment in buy-to-let continues to outperform most major asset classes, as Britain’s rented sector continues to expand, with a sixth of the population – some 10 million people – now living in accommodation rented from private landlords.

New research from criteria search specialist Knowledge Bank shows interest from new investors in the buy-to-let market is growing.

The analysis of brokers’ searches in February found intermediaries are working with potential new landlords, and the furlough scheme is still of huge interest in the residential market.

Knowledge Bank provides a large database of mortgage lending criteria, and the monthly criteria index shows the terms that brokers are actually searching for, which may well be reflected in mortgage completions in two-or three-months’ time.

Buy-to-let brokers again reported interest from ‘first-time landlords’. For the tenth month in a row the criteria hit the top five, and in February it was the most-searched term by brokers. This demonstrates the interest in the rental market from investors, who perhaps would normally look to deal in stocks and shares, but are now shifting attention to buy-to-let.

‘First-time buyer’ also featured in the top five most searched for terms by brokers for the second consecutive month. This suggests those not on the housing ladder were looking to invest in property, potentially due to restrictions around loan to income for residential purchases.

In the residential market, ‘Soft footprint at DIP stage’ was back in the top five most-searched terms after a month’s absence. This suggests brokers are looking for processes that will not impact future applications, potentially due to clients having lower credit scores. The rest of the top five were unchanged from January, with furlough again top of the searches. ‘Maximum age at end of term’ was again the second top searched term, with older clients looking for finance. There was also more interest from those who are self-employed, with ‘Self-employed – one year’s accounts’ in the top five for the tenth month in a row.

The second charge market once again saw an interest in managing debt. Two of the terms in the top five related to debt management. Potentially clients are looking to secure loans against their properties probably to benefit from lower interest rates. ‘Maximum LTV’ was the top searched term for the tenth month in a row.

In the bridging sector, ‘Second charge loan’ was in the top five for the first time since October 2020. This potentially is as a result of clients turning to second charge bridging loans inject capital into businesses, or make refurbishments in order to prevent disturbing their existing mortgages.

Matthew Corker, operations director at Knowledge Bank, commented, “The rental market in the UK is receiving a lot of interest at the moment. Perhaps as a result of the volatility in the stock market due to the pandemic, investors are turning to what they see as a safe investment. With house prices increasing in the past year and interest in rental properties also on the increase, this trend could be set to continue.

“However, with the government announcing they would back 95% loan to value mortgages, this may help more first-time buyers onto the housing ladder, and may see less looking to rent in the future.

“The furlough scheme was again at the top of the list for brokers in the residential market, and the latest extension to the job support scheme will undoubtably result in more lenders adjusting criteria. The stamp duty extension may bring a raft of new clients to the market. However, they will need to move quickly as even with the extra three months, the deadline is still tight for those who have not already started the process.”

“With these latest government decisions, lenders are certain to continue adapting criteria to keep up with the evolving market. With changes coming thick and fast, brokers could spend hours every day searching for the latest criteria, so using a comprehensive criteria search system can save them a massive amount of time and ensure they are providing best advice.”

Criteria Activity Tracker

Top five searches performed by brokers on Knowledge Bank during February 2021