Fears of Buy-to-Let Investment Crisis

by Gill Montia

Story link: Fears of Buy-to-Let Investment Crisis

Leading City analysts are warning of an impending crisis in the buy-to-let housing market. Whilst a substantial number of people have seen very good returns from buy-to-let, a recession in the housing market could lead to many wanting to cash in their investments.

Historically, buy-to-let investors have put a large proportion of their wealth into their properties. At the same time, some retail investors involved in the sector have taken a high risk strategy, and have a concentration of funds in a single asset class.

Concerns have been somewhat offset by Bradford & Bingley, the specialist mortgage bank, which recently reported that net lending almost doubled in its first half of the 2006/07 financial year and has forecast that the buy-to-let market will continue to outperform the rest of the mortgage market into the coming fiscal year.

As a result, it expects full-year profits to be above market expectations, at approximately £377m. However, large numbers of buy-to-let investors are on fixed rate mortgages and this group is unlikely to be able to find comparable terms when their fixed-rate agreements expire.