In the three months to June, lenders advanced 33,200 loans, worth £3.9 billion (up from 32,300 mortgages, worth £3.7 billion in the first quarter). Year-on-year, the buy-to-let market continued to grow strongly, with the volume of loans up 14% (from 29,100) and the amount advanced up 18% (from £3.3 billion).
Growth in buy-to-let lending was evenly split between loans for house purchase and remortgaging, with both showing a 3% increase by volume over the first quarter. Year-on-year, lending for house purchase has grown more strongly (up 17% by volume and 21% by value) than remortgaging (up 10% by volume and 15% by value). However, buy-to-let lending is continuing to recover from a low point in 2009, and lending volumes remain around one-third of their peak in 2007.
The stock of buy-to-let mortgages continues to grow. At the end of the second quarter, the number of outstanding loans totalled 1,416,000, worth £160.7 billion (up from 1,405,000, worth £159.4 billion at the end of the first quarter, and from 1,338,000, worth £153 billion a year earlier).
The average maximum loan-to-value available on buy-to-let mortgages remained at 75%, with average minimum rental cover at 125%. Both have been broadly unchanged for the last three years.
The data showed a slight improvement in the performance of buy-to-let loans, with the proportion of borrowers more than three months in arrears declining from 1.69% at the end of the first quarter to 1.56% at the end of June (in the owner-occupied sector, the proportion was unchanged at
2.05%).
The proportion of buy-to-let properties taken into possession was unchanged at 0.12%, while in the owner-occupied sector the data showed a small decline (from 0.08% to 0.07%). It is not surprising, however, to see a lower rate in owner-occupied households, where there is a concerted effort to extend forbearance wherever possible.
Commenting on the data, CML director general Paul Smee said:
"Buy-to-let is continuing to show signs of recovery, and growing broadly in line with expectations. The rental sector has grown strongly over the last decade or so, and buy-to-let continues to help deliver a wider choice for tenants."
David Whittaker, managing director of Mortgages for Business, said:
“If the Great British Olympic gold rush hasn’t been enough to warm the hearts of even the most pessimistic among us then these figures certainly should. Volumes are up, values are up and, even more encouragingly, arrears are down – a veritable podium of lending success. We expect this trend to continue into the traditionally busier autumn period which should set up the market well for the end of the year. While the market won’t be celebrating the smashing of any records, it won’t just be Britain’s athletes celebrating a golden 2012, there may well be a few satisfied BTL landlords as well.”
Matt Hutchinson, director of flat and house share website Spareroom.co.uk, comments:
"The combination of a continued lack of supply of good rental properties to meet demand – which continues to push up average monthly rents – and a greater availability of competitive buy-to-let mortgage products, has made buy-to-let property an attractive investment in the current economic landscape.
"The demand for quality rental properties amongst tenants is still very strong. With tenants renting for longer because they can't afford to climb onto the property ladder, or don't want to take on the financial burden of a hefty mortgage, there is a real paucity of existing rental stock coming come back onto the market. The knock-on effect is that there is more reliance on new rental stock becoming available.
"With such strong demand amongst tenants and supply still lagging behind, this renewed appetite for the buy-to-let sector is likely to gather pace over the next six to 12 months rather than slow down."
John Heron, Managing Director of specialist lender Paragon Mortgages, comments:
“The figures released by the CML this week show a 5% increase in buy-to-let lending in the second quarter of the year which is a positive rise and demonstrates the continuing growing confidence in the market.
“In the last quarter lenders advanced more than 33,000 loans worth £3.9 billion - up from £3.7 billion in Q1. This is healthy increase and shows that landlords are expanding their portfolios to satisfy the very high demand there is from tenants. Our own research has revealed that a fifth of landlords (21%) plan to purchase rental property in the third quarter.
“It is reassuring to see that buy-to-let lending remains within very prudent limits with loans above 80% representing just 2% of the total, and that credit performance in the sector continues to be better than in the mortgage market as a whole.
“There seems to be little doubt that the private rented sector will need to expand to meet the demand of renters. It is vital therefore that landlords remain motivated to add to their portfolios and that buy-to-let finance is available to support landlords in this endeavour.”
