There were 22,400 new buy-to-let mortgages advanced in the first quarter, down from 38,000 in the fourth quarter of 2008 and 72,400 in the first quarter of last year. The total number of outstanding buy-to-let mortgages was 1,155,200 at the first quarter, slightly down from 1,157,000 at the end of 2008.
By value, buy-to-let gross advances totalled £2.1 billion in the first quarter, down from £4.0 billion in the fourth quarter and £9.5 billion in the first quarter of last year.
Just over three per cent of buy-to-let loans were in arrears of three months or more at the end of the first quarter, up from 2.31% at the end of 2008 and 0.92% at the end of the first quarter last year. But this proportion will have been significantly inflated because of the large reduction in many borrowers’ monthly payments (as the same given sum of arrears represents a higher number of months payments when rates fall). This effect is even more marked on interest-only mortgages (see explanatory note), and most buy-to-let mortgages are taken out on an interest-only basis. There is early evidence to suggest that the number of buy-to-let loans in arrears may in fact have fallen in the first quarter when expressed instead as a proportion of the total mortgage balance – 2.49% of buy-to-let loans had arrears equivalent to more than 1.5% of the mortgage, down from 2.85% in the fourth quarter, although some caution is needed as the sample of reporting lenders changed and the CML has only been collecting data on the percentage of balance basis for less than a year.
It is also important to recognise that there are differences between the buy-to-let market and the owner-occupied mortgage market when looking at repossessions. In the buy-to-let market it is common to appoint a “receiver of rent” as an alternative to repossession – the receiver can collect rent from tenants living in the property and pass it on to the lender, which allows the tenant to continue to live in the property while also ensuring that the cashflow to the lender continues.
In the first quarter of 2009, 1,700 buy-to-let repossessions took place (0.15% of all buy-to-let mortgages), up from 1,300 in the fourth quarter (0.11%) and 900 (0.08%) in the first quarter of last year. This compares with 12,800 (0.12%) across the market as a whole, including buy-to-let. In addition, there were 2,400 cases where a receiver of rent was newly appointed on buy-to-let mortgages more than three months in arrears (0.2% of all buy-to-let mortgages), up from 1,800 (0.16%) in the fourth quarter of 2008, and 100 (0.01%) in the first quarter of 2008.
Commenting on the latest quarterly buy-to-let survey, CML director general Michael Coogan said: “It is not surprising that buy-to-let lending continued to fall in the first quarter. Many buy-to-let lenders relied on wholesale markets rather than retail savings to fund their lending. Some have therefore had no access to the measures to support capital and new lending that have been available to deposit-takers. This, along with general housing market weakness, has influenced the decline in buy-to-let lending.
“However, in the wake of the Rugg review and the government’s recent commitments to strengthen the private rented sector, buy-to-let will continue to fulfil an important role. We urge the government to consider whether other ways to help non-deposit takers to increase their contribution to the new lending market can be achieved, and we would expect this to have a beneficial impact on buy-to-let.”