9th August 2013
The buy-to-let sector is booming along with the rest of the housing market with lenders advancing 40,000 mortgages, worth £5.1 billion in the second quarter of 2013, according to Council of Mortgage Lenders. The CML says that both the number of buy-to-let loans, and the value of lending, were the highest since the third quarter of 2008.
It says that the number of loans advanced in the second quarter was 19% higher by volume and 21% higher by value than in preceding three months. Year-on-year, buy-to-let lending was 19% higher by volume and 31% higher by value. Lending for house purchase accounted for around half the loans advanced, and increased by 15% by volume and 19% by value over the preceding quarter. But the growth in remortgaging was stronger, with an increase over the same period of 24% by volume and 29% by value. The trade body says growth in remortgaging partly reflects improved conditions in funding markets and more widespread availability of mortgage credit.
By the end of June, buy-to-let mortgages accounted for 13.3% of outstanding lending in the UK with the number of outstanding mortgages totalling 1.48 million and worth £168.5 billion.
Buy-to-let mortgages in arrears of over three months accounted for 8.4% of the total, up slightly from 8.3% in the preceding quarter but down from 9.7% a year earlier. The possession rate, at 0.09%, was higher than the 0.07% in the wider mortgage market, but fell from 0.11% in the previous quarter.
The CML’s head of policy Jackie Bennett says:”Strong rental demand is contributing to the continuing expansion of the buy-to-let sector, but growth is also being helped by improved conditions in funding markets and more widespread availability of mortgages. These conditions are creating more opportunities for landlords to remortgage, as well as helping to fund increased activity in the mortgage market more generally. This spring, we have seen the highest levels of lending to first-time buyers since 2007, alongside the continuing recovery in the buy-to-let market.”
David Whittaker, managing director of Mortgages for Business says: “The buy to let market is in rude health. The Bank of England’s forward guidance on interest rates has given investors more confidence, which should translate into further activity over the coming months and years. Rates are at record lows – and now look set to stay that way for roughly three years – and high LTV mortgages are more readily available to landlords looking for ways to tap into high yields and the strong demand for rented accommodation.
“Despite some welcome improvements in the first-time buyer market, demand for rental property remains red-hot. Yields are north of 6% on typical rental property, and will stay that way while housing stock remains in such short supply and first-time buyer lending remains low by past standards. To take advantage of high demand and high yields, landlords are refinancing in their droves to try and raise enough capital to make further additions to their portfolios. Remortgaging in the last quarter hit its highest level since the final quarter of 2008, and landlord house purchasing was at its highest since the third quarter of 2008.”
Stuart Law, CEO of property and investment group Assetz, says: “While the growth of the sector in London is clear to see, the house price ripple effect is only just beginning now in the North where there are excellent opportunities for investment – particularly in key cities like Manchester, Liverpool, Birmingham and their suburbs. Many Southern investors are broadly unaware of the lucrative yields available in northern market, at prices that represent the beginning of the next cycle.”