Buy-to-Let Mortgage Practice Raised U.K. Home Prices
- Feb 06, 2008
Titchfield, U.K.–Investment property fever increased average home cost in the U.K. by £14,000, according to a report published Wednesday.The practice of purchasing a home to rent it out for revenue–called buy-to-let–has added roughly £90 a month to the average owner-occupier’s mortgage payments, making buying difficult for first-time homeowners, the Guardian reports. In recent years, the buy-to-let industry–which prospered in the 1990s when buy-to-let mortgages based on the expected rental income instead of the landlord’s earnings were introduced–has boomed. Currently, 2.5 million homes in England are rental properties owned by more than half a million landlords, who also receive tax breaks on the interest from their home loans. Released by the National Housing and Planning Advice unit, an independent body established in 2004 to counsel the government on housing resources and affordability that meets monthly in Titchfield, the study found average home price had swelled 150 percent in real terms since the mid-1990s.National Housing and Planning Advice chair Stephen Nickell said that, without the impact of buy-to-let mortgages, average home price would have risen about 130 percent since the 1990s.”The typical home would have been £169,000 rather than £183,000,” Nickell said. “This will increase mortgage payments from £1,100 to £1,190 a month.”Nickell also said other factors–including “interest rates, the growing numbers of households, rising incomes and constrained housing supply”–helped drive up price inflation.