Buy-to-let mortgages grow 8pc in Q3

Robyn Hall

November 8, 2012

And the number of loans advanced in the three months to the end of September totalled 34,400 2% more than in the second quarter of 2012.

This means buy-to-let lending in the first nine months of 2012 was 19% higher than the same period last year reaching £11.8 billion

But buy-to-let activity is recovering from a low base and remains subdued compared to the pre-credit crunch era. CML predicted buy-to-let lending this year is likely to total a little over one third of its peak in 2007.

The balance between buy-to-let lending for house purchase and remortgaging in the third quarter remained broadly unchanged.

Lenders advanced 18,680 loans for house purchase (54%) and 15,360 for remortgaging (45%). By value lending was evenly split with £2.03 billion advanced for house purchase and an identical sum lent for remortgaging.

The average maximum loan to value available on buy-to-let mortgages remained at 75% LTV with an average minimum rental cover of 125%. Both measures have remained largely unchanged for more than three years.

And the data showed the stock of buy-to-let mortgages continued to grow.

At the end of the third quarter the number of outstanding loans totalled 1,444,000 worth £164.3 billion. This is up from 1,414,000 worth £162.5 billion at the end of the second quarter and from 1,367,000 worth £156.7 billion a year earlier.

As a proportion of the mortgage market overall buy-to-let lending remains lower than in 2007 and 2008. Despite the fluctuating fortunes of the mortgage market in the last few years the market shares of three distinct groups of borrowers – buy-to-let investors, home movers and first-time buyers have remained broadly stable.

CML director general Paul Smee said buy-to-let lending is continuing to recover and grow in line with expectations.

He said: “As well as continuing to fund owner-occupation lenders are contributing to the expansion of a strongly growing rental sector helping to deliver choice and mobility for tenants. The growth of private renting looks set to continue in the years ahead and lenders are committed to playing a full part in the debate about how best to meet the evolving needs of tenants in the future.”

Jonathan Samuels, chief executive of Dragonfly Property Finance, said: “Such steady growth in both the number and value of buy-to-let loans is one of few bright spots for a mortgage market that still remains a shadow of its former self. Buy-to-let’s share of the mortgage market is slowly increasing too as property investors are among the most bullish about the housing market’s prospects.”

Samuels added: “The mainstream lenders’ continued reluctance to ease their lending criteria or reduce interest rates on high LTV loans is stoking rental demand and by extension boosting buy-to-let demand.

“It isn’t quite robbing Peter to pay Paul but perhaps unwittingly the industry is shifting focus back to buy-to-let.”

David Brown, commercial director of LSL Property Services, said: “Buy-to-let mortgage lending may be a far cry from its pre-crunch level, but it is the only part of the mortgage market that has shown consistent growth in recent years as lenders react to the growing demand for finance from prospective landlords. Rents are at record highs, and the strong yields they are delivering are increasingly attractive for new investors, especially in contrast to the more volatile stock market. Lenders have been upping their commitment to the sector, and they must maintain this progress for the private rented sector to grow at the rate needed to cater for the UK’s growing number of households.”

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