Sharp rise in buy-to-let lending
Friday, 17 Feb 2006 10:26
Buy-to-let mortgage take-up increased by 39 per cent in the second half of 2005
Mortgage lenders have reported a 39 per cent increase in the number of buy-to-let loans taken out in the second half of 2005.
A record 130,400 loans were advanced over the period as the appetite of landlords for buy-to-let investments reached new highs.
The value of lending in the last six months of last year also reached record levels, figures from the Council of Mortgage Lenders (CML) show. It was 47 per cent higher than in the first six months of 2005 at £14.6 billion.
A survey by buy-to-let lender Mortgage Trust reveals that confidence in the housing market and stable interest rates have led increasing numbers of landlords to expand their buy-to-let portfolios.
Thirty per cent of respondents are currently buying more property – more than double the number doing so 18 months ago.
Landlords expect to increase their portfolios by approximately 14 per cent, equivalent to one property per landlord.
The CML's figures show that both loans for house purchase and remortgaging made a significant contribution to the growth of buy-to-let lending.
A slight softening of lending criteria also contributed, with the average maximum loan-to-value ratio for buy-to-let lending rising to 85 per cent, and lenders now expect monthly rental income to exceed mortgage payments by at least 25 per cent.
There was also a small decline in the number of buy-to-let mortgages in arrears, from 0.7 per cent to 0.68 per cent.
"There was a notable pick-up in the buy-to-let sector in the second half of last year, so that lending in 2005 modestly exceeded the year before," said CML director general Michael Coogan.
"In the wider mortgage market, we saw an 18 per cent fall in the number of loans for house purchase last year, so the strong buy-to-let data may partly reflect increased demand for rental property.
"Despite slowing house prices last year, residential property remains a popular investment, and this is set to continue in 2006."
Buy-to-let investors remain confident about the prospects for house prices in 2006, with 83 per cent of respondents predicting them to rise by two per cent or more in the coming year.
Mortgage Trust's survey also shows that the government's U-turn on self invested personal pensions (SIPPs) has had little effect on landlords' intentions to invest.
Nearly nine in ten landlords said the withdrawal of the option to invest residential property in a SIPP would have no effect on their property investment intentions.
Similarly, only three per cent of respondents intent to invest in real estate investment trusts (REITs), when introduced later this year, instead of buy-to-let.
Nicola Severn, marketing manager at Mortgage Trust, said: "With favourable borrowing conditions, healthy rental demand and an expectation of steady house price rises among investors, the outlook for the buy-to-let sector is very favourable indeed."
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