Buy to let definitely on the road to recovery

Nia Williams

April 14, 2011

Paragon’s Financial Adviser Confidence Tracking (FACT) Index, a panel survey of approximately 200 intermediaries, found that 46% of respondents reported higher levels of buy-to-let business during the period compared with the fourth quarter of 2010.

Nearly one in five (18%) intermediaries reported an increase in buy-to-let business of more than 10% during the period, whilst 13% recorded increased business levels of between 6% and 10%. Meanwhile, 15% said buy-to-let business was up by 5%, whilst 45% said that buy-to-let business levels had remained unchanged during the first three months of the year.

Buy-to-let was one of the only growth sectors of the mortgage market in 2010, with gross advances increasing by 22% according to Council of Mortgage Lenders figures. A recent report by market research specialist Datamonitor, entitled UK Mortgage Market in 2011 and Future Outlook, concluded that buy-to-let is the only sector of the market that will experience ‘significant growth in 2011’.

Paragon’s FACT Index also showed that 53% of intermediaries reported improving credit conditions in the buy-to-let market during the first quarter, with wider product availability and easing criteria levels. Looking forward, 56% of intermediaries forecast that product availability will improve further during the second quarter of 2011.

The distribution of buy-to-let mortgages introduced by financial advisers in the first quarter in terms of their loan-to-value ratios (LTV) shows the average LTV was 65%. FACT showed 25% of mortgages had an LTV up to 60%, 33% were between 61% and 70% LTV, 31% were between 71% and 75% LTV, and 11% over 75% LTV.

Commenting, John Heron, Paragon Mortgages’ managing director, said: “These figures demonstrate intermediaries’ growing confidence in buy-to-let. Nearly half of intermediaries reported an increase in business levels during the quarter, with one in five increasing their buy-to-let business by more than 10%. Landlord demand is clearly strong and buy-to-let finance is becoming more readily available to meet that demand. Although we are obviously not operating at ‘normal’ market levels, buy-to-let is on the road to recovery.”

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