Lender puts its faith in rental market

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A leading mortgage lender has signalled that it expects the private rental market to continue to perform well.

The Woolwich said that it was confident enough in the market for buy-to-let properties that it was introducing a simplified and more competitive approach to its rental calculation for landlords looking for new mortgages.

Now, the lender's minimum interest cover will drop from 125 per cent of a nominal rate of five per cent to 105 per cent of the pay rate of the product selected for all customers. This means that a landlord looking to borrow £200,000 would require a monthly rental income of £960.75 - as opposed to £1,041.66.

Andy Gray, head of mortgages for the Woolwich, said that the move showed that the lender was confident in the market.

"We know that the demand for rented property is very strong in many areas as high property prices are forcing potential home buyers out of the market and into the rented sector," he explained.

"But despite continuing high prices, and forecasts of a slowdown in house price inflation, there is no actual expectation in the market of price falls.

Recently, a university professor revealed that the current economic and social situation in the UK meant that renting could be a more sensible option than buying for many people.

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