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UCB warns that BTL market is slowing

Growth in the buy-to-let market will be slower over the coming years, according to Nationwide’s specialist lender UCB Home Loans.

UCB says increased interest rates and a lower rate of house price increases are contributing to the slowing growth of the market, with BTL lending in the second half of last year falling by 18 per cent to 9.8bn from 12.2bn in the first half.

The shift in buying patterns indicates that existing investors are expanding their portfolios but fewer new investors are entering the market.

A recent study by the Council of Mortgage Lenders shows that 38 per cent of landlords questioned from a sample of 1,340 say they plan to increase their portfolios and 60 per cent plan to stay in the residential market for more than 10 years.

Builders have been trying to encourage sales of properties by offering incentives such as discounts of about 10 per cent for buying big numbers of units in a development which can be used as part of a BTL portfolio.

The average prices paid for property by landlords are likely to rise at around the rate of inflation, with both house price rises and base rates expected to peak at 5 per cent over the year.

UCB says some property investors are starting to look towards commercial or overseas property and this is likely to continue into 2006.

Managing director Charles Reed says investors need to take a long-term view when planning to buy a BTL prop-erty. He says: “It is sensible to take at least a 10-year outlook when considering a purchase and your view should be on making a steady rental income over the period rather than just concentrating on capital gain.”

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