Today marks the 25^th anniversary of the inception of buy-to-let mortgages, which were officially launched as a finance product.

In 1996, the Association of Residential Landlords (ARLA) worked with a small group of lenders to develop a mortgage product specifically tailored to landlords.

In doing this, they sought to facilitate and encourage investment needed to respond to growing tenant demand and a critical shortage of homes in the recession-hit UK housing market.

Richard Rowntree, Paragon managing director for Mortgages, said: “Since being launched as a mortgage product specifically designed for landlords 25 years ago, buy-to-let finance has helped to transform the PRS.

“The PRS is now a vital component of the UK’s housing provision, with renting no longer a last resort. The PRS is a tenure of choice as well as need and this is supported by the diversity of those who actively choose rented homes, benefitting from the flexibility they provide.”

In the 25 years since, the buy-to-let market has advanced a great deal, helping the UK’s private rented sector (PRS) expand and improve substantially.

The PRS has almost doubled in size, expanding from 2.4 million households in 1996 to 4.4 million in England today, accounting for 19% of UK households, up from 10% recorded in 2001, and is now above the provision of social housing at 17%.

Robert Jordan, ARLA Propertymark Past President, commented: “We at ARLA realised that the housing market was in a low ebb; houses weren’t selling, which meant a lot of people were letting their homes to move to a new property. When the housing market picked up those properties sold and there was a need for more rented properties to fill the gap for tenants, but we couldn’t see where we would find more homes to let.

“It became clear that the mortgage options weren’t suitable, so together we designed a product, buy-to-let, that would enable more investors to purchase an investment property and let it under the new Housing Act 1988 regulations.

“Paragon and NatWest were the first two mortgage lenders we approached. Today, private landlords house approximately five million households across the UK at no cost to the exchequer.”