One industry expert claims that the most recent interest rate rise of .25%, the fifth in the last 11 months, will have a negligible effect on the buy to let market claims , with another specialist lender claiming it may actually boost the market.
There has been talk of this happening, and fears that the high increase in the number of property investors coupled with the Bank of England’s interest rate rise to 5.75% could potentially burst the buy to let bubble.
But Neil Young, Chief Executive of property investment portfolio managers Young Group says that those who have a rational strategy, correctly assess their exposure to risk and take a long-term view will continue to benefit from well-chosen residential property investments.
His optimism is backed up in a report by Nationwide's specialist lender, UCB Home Loans.
It says that landlords are less affected by rate changes than traditional home buyers, as they tend to take a long-term outlook when calculating the yield they will make from a property.
Instead, rate increases can have a positive effect for them, because rising interest rates and increasing house prices are making it easier for landlords to let their properties.
Keith Astill, managing director at UCB Home Loans said: “The combination of high house prices and more expensive loans is pushing more people into the rental market, where, as tenants, their overall outgoings are generally lower than those of homeowners,".
" Ironically, people are renting for longer because it's more difficult
to afford to buy, which is in turn providing a boost to the buy-to-let sector," he added.
According to latest figures from the Council of Mortgage Lenders, the value of buy-to-let lending increased by 57% last year, with 330,300 mortgages worth a total of GBP38.4 billion being taken out.
Mr Astill said: "Whilst the market is likely to remain reasonably strong for the foreseeable future, there will come a point where natural forces come into play and the market balances itself out.
"By 2010 I suspect that growth in the buy-to-let sector will have calmed down," he concluded.
However, other sectors of the property market are more critical of the interest rate rise.
