Fewer PRS homes in 2025 as BTL lending set to fall

Fewer PRS homes in 2025 as BTL lending set to fall

0:06 AM, 17th December 2024, About 2 hours ago

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A predicted decline in BTL lending to private sector landlords may reduce the number of homes to rent in 2025, UK Finance says.

The trade association for mortgage lenders has published an outlook for the buy to let market in 2025 which it describes as ‘challenging’.

The main reason given is because of the extra taxes landlords now face – despite interest rates predicted to fall next year.

‘Slight fall in buy to let lending’

The head of analytics at UK Finance, James Tatch, said: “In 2025 we are forecasting continued steady growth in both house purchase and remortgage lending as affordability improves further.

“We are, however, forecasting a slight fall in buy to let lending in 2025.”

After the BTL market contracted in 2023, there has been a slight recovery this year as lending for house purchases to landlords grew by 13% to £10 billion.

This growth was a result of the drop in new BTL mortgage rates over the year.

Additional 2% Stamp Duty surcharge

However, the outlook for next year appears more difficult, UK Finance says, with the introduction of an additional 2% Stamp Duty surcharge acting as a deterrent to a market facing increased regulatory and taxation challenges.

While the sector continues to adjust to these issues, the organisation is predicting that BTL purchase activity next year will fall by 7% to £9 billion.

In recent weeks various surveys have predicted that landlords are selling up.

Among them is the National Residential Landlords Association (NRLA) which found that 31% of landlords intend to sell their rental properties within the next two years.

Big fall in mortgage lending

In the residential mortgage market, UK Finance says that last year’s higher interest rates and rising living costs limited affordability and led to a big fall in mortgage lending.

This trend persisted into the early part of this year but, starting in early summer, the impact of wage growth and lower mortgage rates saw a rise in home purchase lending.

There was an 11% rise this year to £135 billion, compared to 2023.

While the number of loans rose by 4% over the year, activity remains much lower than the averages seen in the decade before 2023.

However, improved affordability will see an additional 10% rise in purchase lending in 2025, reaching £148 billion.


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