BTL gross mortgage lending falls by 12% in 2020 under the impact of COVID-19

13 Aug 2021

Buy to let mortgage market under COVID-19

The IRN Research Report Targeting Buy-to-Let Landlords 2021 found that gross BLT mortgage lending declined by almost 12% in 2020. Recent legislative and tax changes have had a negative impact on the BTL market from 2016 onwards and these negative forces were compounded in 2020 by the COVID-19 pandemic. However, the market is expected to see a recovery in 2021, driven by the ending of the Stamp Duty Holiday in the middle of the year and the recovery in the UK economy as COVID-19 restrictions were eased.

COVID-19 and official responses to it reshaped the BTL and housing markets in many ways. Key changes were:

  • limiting the supply of housing coming onto the market but also boosting housing demand (especially for homes outside of the major cities and for larger homes) leading to rising prices.
  • restricting and banning for a period landlords taking proceedings against tenants in rent arrears, which financially disadvantaged some landlords.
  • made capital gains rather than rental income a major attraction for BTL

Recovery in 2021

Gross BTL mortgage lending is expected to rise by almost 10% in 2021 but will remain below the level seen in 2019. In contrast with recent years, in 2021 (and to a much lesser degree in 2020), the BTL mortgage market has shifted back towards home purchases rather than remortgaging, with the Stamp Duty Holiday helping this trend. Rising demand for BTL mortgages in 2021 was also driven by rising demand for rental properties from tenants. Rising tenancy demand has helped push up rental yields to around 6% in the first half of 2021.

Other Buy to let facts

Other key findings from the report are:

  • Gross lending on BTL mortgages is expected to  rise by 12% between 2021 and 2026, with a decline expected in 2022, followed by recovery in the following four years.

  • The amounts outstanding on BTL mortgages is expected to rise by around 19% between 2021 and 2026

  • There are around 75 major BTL mortgage lenders in the UK, but two players dominate the market, Lloyds Banking Group (e.g., Birmingham Midshires) and Nationwide (e.g. Mortgage Works).

  • The typical BTL landlord is not a professional landlord, in the sense of earning the bulk of their income from their BTL activities

About the report

This report outlines the broad trends and developments amongst buy-to-let (BTL) landlords with regards to their mortgage activities. This report focuses on the latest developments and market drivers of the BTL mortgage market, the market size, and the future of the market in the coming five years.

BTL landlords are defined as individuals who rent out properties and are purchasing the properties they rent out with at least one BTL mortgage. These individuals may also own property on which they do not have a BTL mortgage, for example, if they own a property outright or used an alternative means of finance to purchase the property, but they must own at least one property on which a BTL mortgage is used to finance the acquisition.

Report Description

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