The First Buy-to-Let Mortgage (1996)
In 1996, the Association of Residential Letting Agents (ARLA) partnered with lenders to launch the first specific 'Buy-to-Let' mortgage product.
The concept of 'Buy-to-Let' as we know it today did not officially exist before 1996. Prior to this, individuals wanting to buy a rental property had to secure expensive commercial loans, which required large deposits and scrutinized the borrower's personal income to cover the debt.
In 1996, the Association of Residential Letting Agents (ARLA) worked with a panel of lenders (including Paragon and NatWest) to create a new, standardized lending product. This new 'Buy-to-Let' mortgage was revolutionary because it assessed the loan's viability based primarily on the property's projected rental income, rather than just the applicant's salary.
Explosive Growth
This financial innovation, combined with the deregulation of tenancies (ASTs), unleashed an unprecedented wave of private investment into the UK housing market, growing the private rented sector from around 2 million households in 1996 to nearly 5 million today.