A continued healthy appetite for buy-to-let finance

Increasing the flow of high quality homes to rent 

Recent survey data from the Council of Mortgage Lenders (CML) shows that buy-to-let lending totalled £24.1 billion in the second half of 2007, up from £21.2 billion in the first half of the year and £20.8 billion in the second half of 2006.

The number of loans (including remortgages) to buy-to-let landlords in the second half of the year was 179,100, up from 171,800 in the first half of the year and 177,200 in the second half of 2006.

The total number of outstanding buy-to-let mortgages has now passed the million mark, standing at 1,038,000 at the end of 2007 which is nearly 23 per cent up on the 846,900 a year earlier.

On average, at the end of 2007 lenders had an 85 per cent maximum on the percentage of the value of the property that they were willing to advance, and required rental income to amount to 120 per cent of the required mortgage payment.

Arrears remain lower than in the wider mortgage market, with 0.73 per cent of buy-to-let loans in arrears of more than three months at the end of 2007 (up from 0.63 per cent at the end of the first half of the year, and 0.58 per cent at the end of 2006). This compares with 1.1 per cent in the wider mortgage market. The proportion of buy-to-let mortgages taken into possession was also smaller than in the wider market - 0.18 per cent for the year as a whole, up from 0.13 per cent in 2006 but lower than the 0.23 per cent in the wider market in 2007.

The CML commented that they expected to see a continuing healthy appetite for buy-to-let finance this year, in line with expected consumer demand for private rental properties, and buy-to-let would continue to fulfill an important role in helping to deliver an increased flow of high quality homes to rent. Buy-to-let has remained resilient in the face of the funding constraints that have affected the sector and the wider mortgage market.
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, according to the CML.

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