21 June 2014
The buy-to-let property market is still thriving, according to the Council of Mortgage Lenders (CM
The buy-to-let property market is still thriving, according to the Council of Mortgage Lenders (CML).
The number of buy-to-let loans rose by 23% last year, taking their number to 1,038,000 and accounting for 10.3% of all outstanding mortgages.
This lending picked up in the second half of the year at a time when general mortgage lending was starting to fall.
The CML said demand from landlords had been resilient, despite problems at some lenders like Northern Rock.
"Tenant demand for private rented property remains strong, and buy-to-let is fulfilling an important role in helping to deliver an increased flow of high-quality homes to rent," said Michael Coogan, the CML's director general.
"Many buy-to-let loans have interest rates linked to interbank rates, so may have seen hefty increases in payments when Libor rose to abnormally high levels in the second half of 2007.
"These are now likely to be returning to lower levels in line with the reduction in Libor rates since December last year," he added.
Despite the widespread perception that lending to landlords is a high-risk business, the figures show that these customers have lower levels of arrears and repossessions than home buyers generally.
The number of buy-to-let loans that were more than three months in arrears went up from 0.58% to 0.73% during 2007.
But that was still a lower level of arrears than the 1.1% seen among all mortgage borrowers.
And the repossession rate was just 0.1%, compared with the 0.23% rate seen for the whole market.
"None of this is surprising, this is the most prime sort of lending," said Malcolm Harrison of the Association of Residential Letting Agents (ARLA).
He argued that there were good reasons for the market to keep on growing.
"In the past two years we have seen more single households being formed, more requirement for flexibility among contract workers, and immigration pays a part too," he said.
In the wake of the banking crisis that brought the Northern Rock to its knees, several smaller specialist mortgage lenders have been in trouble and have dropped out of the market.
Paragon, the UK's third biggest buy-to-let lender, has been forced to raise £287m from shareholders to keep its business going because banks have been reluctant to lend it any more money.
However, most buy-to-let lenders are part of larger banking groups, such as the Bradford & Bingley, HBOS, Lloyds TSB, Nationwide and Barclays.
The total number of lenders has remained roughly the same at 95 over the past year, as some new companies have entered the market.
But the number of buy-to-let deals on offer has fallen, according to the financial information service Moneyfacts.
After peaking at 2,200 last July their number has now shrunk to 1,500, though that is still more than a year ago.
Tim Hague, of the buy-to-let mortgage lender Birmingham Midshires, predicted the market would continue to be buoyant this coming year.
"With demand continuing to outstrip supply, buy-to-let will continue to be in demand due to socio-economic factors such as rising immigration," he said.