The original amount pledged was £200m in the Autumn statement, but was raised to £1bn due to the scheme being “significantly oversubscribed”. The Build to Rent fund was launched in response to the recommendations of the Montague report which was published in August. The report highlighted the rise in rents against earnings and also the dominance of small landlords, where just 1 per cent of private landlords own more than 10 properties.
These figures coupled with the difficulty many first time buyers are facing when it comes to getting mortgages and rising rates in unemployment were catalysts for the Government to invest money into building houses specifically for the Private Rental Market, boosting the affordable housing pool landlords can invest in.
As well as the ‘Build to Rent’ fund, the Government has also extended the ‘Help To Buy’ and ‘NewBuy’ Schemes. From 2014 to 2017 the Government will support £130bn of first time buyer mortgages by guaranteeing 15% of the loan leaving borrowers at risk of losing only their 5% deposit and lenders liable for only 80% of the purchase price. Lenders taking part should therefore be happier to accept smaller deposits as security for loans, according to the Council of Mortgage Lenders (CML).
The Government believes stimulating the construction industry is key to bringing the UK economy onto the road to recovery. Addressing the current supply and demand property situation will hopefully stabilise property values. Lenders in turn should feel more confident about loaning and therefore offer BTL mortgages at more competitive rates.