Number of buy-to-let properties up by 84,000

The number of properties being bought with buy-to-let mortgages increased by around 84,000 in 2011, modestly helping to increase the supply of private rented housing in the UK, acc

Related topics:  Mortgages
Millie Dyson
9th February 2012
Mortgages
During the fourth quarter of 2011, a total of 34,800 buy-to-let mortgages (of which 15,600 were remortgages) were advanced, with a total value of £4 billion. This was virtually identical to the volume of business in the third quarter (34,300 loans worth £4 billion) but up on the fourth quarter of 2010 (26,300 loans worth £2.9 billion).

Compared with the height of the market in the third quarter of 2007, when quarterly lending totalled over 93,000 loans worth £12.7 billion, the buy-to-let market continues to operate at relatively subdued levels, but it is clearly continuing to recover from its low point in 2009.

Buy-to-let mortgages account for nearly 13% of the total outstanding value of mortgages in the UK, and buy-to-let lending represented nearly 11% of total gross mortgage lending in the fourth quarter of 2011.

The arrears performance of buy-to-let loans is better than the owner-occupier market, but the repossession rate is higher. This should be no surprise. For obvious reasons, lenders make particularly strenuous efforts to show forbearance over sometimes very extended periods to home-owners to try to help them keep their homes wherever realistically possible.

This is a less marked imperative in the buy-to-let sector where greater fluidity over shorter timescales is normal. Provided the landlord has a bona fide buy-to-let mortgage and tenancy is recognised by the lender, the tenant's rights are unchanged even if their landlord does default.

Commenting on the latest data, CML director general Paul Smee said:

"Buy-to-let lending continues to perform well. Demand for rented property remains high, so the rationale for buy-to-let remains strong, and there is little reason to foresee any change to this positive outlook for the sector.

"These figures do not suggest that buy-to-let is crowding out first-time buyers; more that it is performing a really important role within the overall housing market. The benefits of the availability of good quality, private rented housing should not be overlooked, especially as there are many households which need the flexibility and mobility that the private rented sector is well placed to provide."

Matt Hutchinson, director of UK flat and house share website SpareRoom.co.uk, comments:

"Although buy-to-let numbers were up in 2011, the reality is that there aren't anywhere near enough new rental properties coming onto the market to cope with demand.

"Encouragingly, there have been recent signs that lenders have a renewed appetite for buy-to-let,  with the strength of the rental market giving them the confidence to re-enter a sector they considered far too high a risk a couple of years ago.

"However, the problem of demand versus supply still persists. Aspiring first-time buyers are renting for longer as they are still finding it almost impossible to get a foothold on the property ladder, with deposit funds being eroded by the high cost of living and banks still cautious about lending at high LTVs.

"And the cruel irony is that people are also being trapped in the rental market by rising rents. With renters staying in properties for longer, there is a lack of old stock coming back on to the market, which is affecting the supply-demand balance.

"Tenants are in a precarious position. The balance of power is tilted in favour of landlords, who are in a position where they can potentially inflate prices due to heightened demand. But landlords who take advantage of a booming rental market in this way run the risk of pricing out good tenants.

"Landlords should weigh up the benefits of retaining reliable tenants against the short term benefits of hiking rents to take advantage of a booming rental market. The last thing any landlord wants is rental void periods, and if that means holding off imposing rent rises on current tenants or even dropping the rent a little, then in the longer term that may be a better course of action than trying to squeeze as much rent out of the property as possible.

"With demand likely to remain high throughout 2012, sensible pricing by landlords may prevent UK rents rising out of control."

Jonathan Samuels, CEO of Dragonfly Property Finance, comments:
 
"Buy-to-let is nowhere near the giddy heights of 2007 but these latest figures confirm that it's on its way back. The buy-to-let sector is one of the few beneficiaries of the current economic climate.
 
"Buy-to-let is being driven by the weakness of the economy and the continued caution of high street lenders at higher LTVs. Consumers are wary about buying and lenders are wary about lending. The result is soaring demand for rental property, which is pushing yields ever higher.
 
"Landlords are making hay while the sun shines, adding to their portfolios in order to increase their exposure. The fact that property prices are low is contributing to this trend. Landlords can buy low and rent high, which is manna from heaven."

Nick Hopkinson, Director of property company, PPR Estates, comments:

“Buy to let continues to grow in popularity amongst private investors and banks despite the wider credit crunch continuing. At around 13% of all UK home loans, it remains a small part of the mortgage market but is increasingly seen as a lucrative source of profit by the big lenders.

"Arrears are generally much lower amongst BTL owners than other mortgage borrowers and with higher interest rates and banking charges the norm in this sector of the market it’s not difficult to see why the number of mortgage products available has mushroomed for landlords recently.

"As lenders get a better understanding of the long-term mentality of most private la
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