At £16.4 billion, gross buy-to-let lending was 19% higher than the £13.8 billion advanced in 2011, reaching its highest level for four years.
On a quarterly basis, there were 36,700 buy-to-let loans, worth £4.6 billion, advanced in the fourth quarter - up from 34,300 loans worth £4.2 billion in the third quarter, and 34,200 loans worth £3.9 billion in the fourth quarter of 2011.
By number, a total of 136,900 buy-to-let loans were advanced during 2012 (of which nearly half were for remortgage). The total number of buy-to-let mortgages outstanding at the end of 2012 stood at 1,445,300, accounting for 13% of all mortgages.
Lenders typically required a minimum 25% deposit on buy-to-let loans throughout 2012, with an average minimum rental cover requirement of 125%.
In terms of loan performance, 1.14% of buy-to-let loans ended the year in arrears of more than three months, compared with 2.03% of owner-occupier loans. On the other hand, the annual repossession rate at 0.48% was higher than the equivalent owner-occupier rate of 0.27%, reflecting the different considerations involved in the two sectors.
CML director general Paul Smee comments:
"Buy-to-let is benefiting from strong tenant demand, which is likely to continue. Loan performance compares favourably with the owner-occupier sector, and the overall outlook for the buy-to-let sector is positive.
"Landlords who can demonstrate a strong track record are in a good position to expand their portfolios. However, new potential landlords need to tread carefully before entering the buy-to-let market; considerations such as landlord licensing reinforce the need for potential landlords to gain a strong understanding of the legal and operating environment.
"Looking ahead, we will find out later in the year whether or not buy-to-let lending ends up within the scope of mortgage regulation as a result of the European Directive currently being finalised. If this does happen, policymakers must ensure that the very clear differences between buy-to-let and owner-occupier lending risks and operations are fully recognised in any regulatory framework that may emerge."
Jonathan Harris, director of mortgage broker Anderson Harris, says:
"It is no surprise that the sector continues with its strong performance. As would-be first-time buyers continue to struggle to get on the housing ladder, more people are turning to renting. This is pushing up rents, making the sector increasingly attractive to investors. With more buy-to-let deals available, rates are increasingly competitive although criteria remain tighter than before the downturn and are not easing significantly.
"While capital growth on investment properties is likely to remain subdued for some time to come, income is strong and returns favourable when compared with other investments. Buy-to-let is only going to grow in popularity as mortgage rates become increasingly competitive.
"However, while the private rental sector becomes increasingly important to the provision of housing in the UK, it has a long way to go to reach the 2007 peak of the market, reflecting the continued caution of lenders and investors alike."
