Buy to let increasing, reports Nothe London Mortgage Broker, London Mortgage Advice Thursday, 11th February 2010

According to figures from the Council of Mortgage Lenders (CML),the amount of new buy-to-let borrowing increased for the second quarter in a row in Q4 2009.

However that was a significant fall on the 38,000 buy-to-let mortgages advanced in Q4 2008There were 25,800 new loans taken out by residential property investors in the quarter, up from 23,700 in Q3,


Most buy-to-let mortgage lenders have shut up shop or stopped lending to investors, and what was a boom industry is now far more muted.The recovery in the buy-to-let sector is modest and started from a very low base. For 2009 in total, there were 93,500 buy-to-let mortgages advanced, compared to 222,700 in 2008 – a 58% drop.

Buy-to-let lending represented only 5.9% of all lending in 2009 (10.7% in 2008), but the total value of outstanding buy-to-let loans still represented around 11.8% of the mortgage market despite the recent shrinkage in new business. Buy-to-let gross lending was £8.5 billion, down from £27.2 billion in 2008.

On the whole, buy-to-let borrowers usually take out their mortgages on an interest-only basis, and pay off the capital amount outstanding when they sell the property in the future. Therefore such investors have particularly enjoyed the benefits of the low interest rates which have prevailed for the past year.

This has helped those who have fallen into arrears as a result of non-payment of rent by tenants, or rental voids, to recover their position relatively quickly.

The number of landlords in arrears to the tune of 1.5% of the balance of their mortgage or more remained static in Q4 at 20,700, but that is a 37% drop on the 32,900 in arrears a year before.

The number of buy-to-let properties repossessed in Q4 fell by 25% from Q3 to stand at 1,200 properties – just 0.10% of the total buy-to-let book.

Overall in 2009, there were 5,700 repossessions (0.46% of the total book). This is similar to the 0.42% annual possession rate for the wider mortgage market.

TCML’s director general Michael Coogan said:

"The figures show that the buy-to-let market continued to improve, albeit slowly, throughout 2009, and we are encouraged by this recovery. The new business market remains well below previous levels though, and below the level of activity which is needed to enhance a vibrant private rental sector in the UK.

"We are concerned that future, wrongly directed, regulation may actually prevent buy-to-let playing its vital role in providing good quality homes and wider housing choices for people who cannot afford home ownership or do not qualify for social housing.

“Trends in arrears and possession, and the suggestion that there is potential for consumer detriment to arise from buy-to-let mortgages, are relevant to the current consultation by the Treasury on whether the FSA should be given power to regulate these transactions, and we will be responding on this shortly.”

Simon Gordon, Head of Communications, at the National Landlords Association, added:

"Clearly, the figures suggest the buy-to-let market is far more robust than originally feared. The government should take note of this when considering whether regulation is really necessary. Rather than wasting effort on further legislation they should be encouraging lenders to get credit flowing again."