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Buy-to-let mortgage market stable

Thursday, 27 September 2007 12:00 AM

The buy-to-let market remains strong despite recent falls in house prices overall, according to new research released today.

Rental yields in the market are up by six per cent on a month ago, according to analysts Paragon.

The average annual returns made by landlords increased to 10.3 per cent, up from 9.4 per cent three months ago.

This comes despite reports from RightMove.co.uk that prices have fallen 0.6 per cent in the last month.

"Activity in the securitisation and whole loan markets has been muted over the summer and, when investors return in force, credit quality will be top of their agenda.

"Given the superior, indeed exemplary, credit profile of buy-to-let, we can expect them to favour paper backed by low risk mortgage assets originated by specialist lenders," commented Nigel Terrington, chief executive of Paragon.

According to the Council of Mortgage Lenders (CML) only 0.63 per cent of buy-to-let properties were in arrears for three months or more in September, compared with 1.06 per cent in the market as a whole.

The market has benefited from strong consumer demand in recent weeks, as market uncertainty and high interest rates have made an increasing number of those looking to buy property hesitate.

The findings support evidence from the Royal Institution of Chartered Surveyors (Rics) released earlier this month which stated rental demand was at its highest ever level.

"The current housing market is in many respects a positive signal for buy-to-let, which has certain counter-cyclical characteristics relative to the mainstream market.

"Tenant demand remains buoyant and investors continue to invest," concluded Mr Terrington.

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