The History
30 years ago there was no mainstream Buy to Let market. Landlords bought for cash or inherited properties, the only other route was through commercial lending from High Street banks. Normal domestic house purchase was via mortgages from Building Societies, who effectively lent out what was deposited by savers and banks did not compete in this market.
When demutualisation of Societies began, greater competition came about and as the Banks started lending for residential purchases, specialist lenders started to fund Buy to Let purchases, eventually followed by some societies and some banks. A great deal of this money has come from the money market rather than from private savers. Since the mid 90s there has been a continuing rise in the funding market with only a few set backs when institutional lending dried up in the financial crash.

From being a minority sport in the mid 90s and early noughties, Buy to Let became the dinner party topic of discussion in the last 10 years and again recently with the Pension Freedoms, leading newspaper columnists to suggest that people are cashing in their pensions to buy rental properties, not recommended as most pension funds would be insufficient to even provide a deposit and people would be depriving themselves of pension income by tying it up in bricks and mortar.

Current Situation
The scale of the market has grown, 2 million people already own a Buy to Let property (Richard Dyson, Daily Telegraph Personal Finance editor, The Telegraph 2016) and this is illustrated in two recent figures/statements:
firstly-banks lent more money to let to Buy to Let Landlords in 2015 than to SMEs!(Richard Dypson, reference as above)
Secondly-In his Autumn Statement, the Chancellor said: ‘Frankly, people buying a home to let should not be squeezing out families who can’t afford a home to buy.'(George Osborne, Autumn Statement 25/11/2015).

Regulation
As a result of these situations, and perhaps for political reasons, the Chancellor of the Exchequer has made 3 major changes to the taxation of the Buy to Let market.
1. He is removing higher rate relief on mortgage interest for Higher rate tax paying landlords, this benefit remains for people who invest in other business ventures but there is no tax relief for people who invest in shares. This will be phased in from 2017/18.
2. He has put some, but not all, aspects of B2L lending under regulatory the control with instructions to take whatever action they see fit to control lending in this sector, this to be implemented from 21/3/2016
3. He is implementing a 3% additional Stamp Duty Land Tax on any property purchase that is not a Principal Private residence with effect from 1/4/2016.

Impact
So far little reaction has been seen in the market, though it is likely that a number of property purchases will be pushed through before 31/3/2016 to avoid the 3% levy.
Dominic Field, a director of buying agent Temple Field Property, was reported in the Financial Times 27/1/2015 “Some investors who had been steadily building a portfolio would think again about a sector subject to political risks, selling up and retreating to investment classes such as equities”. David Whittaker, Managing Director of Buy to Let broker Mortgages for Business, in the same article, said “the eight Buy to Let lenders which deal with Limited Company transactions were preparing for a veritable stampede of applications before the April(2016) deadline.
It is possible some landlords may sell some properties to release equity to reduce borrowing on their remaining portfolio.

The Future
Everybody has an opinion and eventually if you want to play in this market you will have to put your money where your mouth is. The Bank of England has the power to make lenders raise assumed risk rates of calculation for affordability against rents and some pundits are already calling for increased rentals to compensate landlords. Meanwhile government attempts to increase housing starts and support first time buyers with a variety of support schemes seem to be working very slowly and long term in-spite of the rhetoric of the immediate need.
In conclusion beware Buy to Let is not a get rich quick scheme, property prices can fluctuate, the asset is illiquid, landlords can suffer void rent periods, there are various and increasing landlord responsibilities, etc.
Buy to Let is an opportunity but also responsibility not to be undertaken lightly, but with the potential for long-term Income and Capital Gains.

This article is for information only and is not intended as advice.