Echoing a more pronounced decline of 11% in the wider mortgage market, buy-to-let lending in the first quarter was around 3.5% lower than the £3 billion of lending across 28,600 loans in the fourth quarter of 2010, but up on the £2.1 billion and 22,000 loans in the first quarter a year ago.
Overall, the total outstanding number of buy-to-let loans rose from 1,305,000 at the end of 2010 to 1,313,200 at the end of the March 2011, with a rise in the outstanding value of buy-to-let lending from £151.5 billion to £152 billion.
Buy-to-let lending accounts for 12.3% of total outstanding mortgage lending by value, and 11.6% of mortgages by number. Lending criteria and characteristics changed very little in the quarter.
The average maximum loan-to-value ratio remained at 75%, with the average minimum rental cover requirement at 125%.
In terms of loan performance, the arrears rate on buy-to-let lending is increasingly similar to the owner-occupied sector.
As at the end of March, the 3-month arrears rate stood at 1.62% on buy-to-let loans where no receiver of rent was in place, and 2.24% on buy-to-let loans if receiver of rent cases were included. This compares with a 3-month arrears rate of 2.15% in the owner-occupier sector.
The repossession rate on buy-to-let mortgages remained higher than in the mainstream market (0.13% of buy-to-let loans were subject to repossession in the first quarter, compared with 0.07% of owner-occupied loans), as has been the case for a substantial period, primarily reflecting the additional forbearance efforts in the owner-occupier sector to keep borrowers in their homes (as opposed to landlords whose properties may be empty, for example).
CML director general Michael Coogan said:
"Buy-to-let continues to progress positively in the context of a stable, but still low-volume, overall market. Demand for rental property remains strong, and as more funding becomes available we would expect to see buy-to-let lending increasing.
"The performance of buy-to-let loans is also holding up well, and the differential between arrears rates in the buy-to-let sector and the owner-occupier sector has narrowed substantially so that there is now only a modest difference between them."
David Birne at HW Fisher & Company chartered accountants, said:
"The relatively benign arrears and repossession figures from the CML are what we would expect given that lenders are still not pushing for repossession, barring the most extreme cases. They are still happy to receive interest and are disinclined to foreclose.
"The main reason the figures aren't worse is the breathing space afforded to homeowners by the ongoing low interest rate environment. When this comes to an end, it will be the end of the road for many overstretched households.
"The CML suggests rates may stay low for a protracted period but this is by no means guaranteed, especially following the Bank of England's latest Quarterly Inflation Report, which only yesterday suggested inflation could rise to 5% this year. If that's the case then rates could rise sooner rather than later.
"Throw further public sector job cuts, a stagnant economy and the soaring cost of living into the mix and there is every reason to believe arrears and repossessions will spike towards the end of the year and on into 2012.
"We speak to people in debt every day and many are surviving only because mortgage payments are so low. Once rates rise, even by as little as half or one percent, they will be tipped over the edge.
"It is important not to be lulled into a false sense of security by these latest figures.
"What's vital is that anyone struggling with their mortgage payments, or debts generally, seeks advice as soon as possible from a suitably qualified individual."
Matt Hutchinson, Director, SpareRoom.co.uk, comments:
"Research from SpareRoom.co.uk shows that there is an average of 5.2 people searching for every available room to rent across the UK
"Our research backs Michael Coogan's comments this morning that demand in the rental market is strong. With so many people looking to rent across the UK and a drought of rental properties to choose from, applicants need to move fast to secure the best new properties coming onto the market.
"On a positive note for potential lodgers, we've seen an increase in homeowners renting out their spare rooms to help out with mortgage payments and ever increasing living costs. This should help pick up the slack in the demand-heavy rental market."
David Whittaker, managing director of Mortgages For Business, said:
“The owner-occupier and buy-to-let mortgage markets are in much the same situation as Kate and Pippa Middleton on the big day last month – all the attention maybe focused on one of them, but in reality, the junior sibling is quietly stealing the show.
"As house prices flat-line, the BTL market still provides excellent opportunities for investors and professional landlords. And with rental demand likely to remain strong for the rest of the year, these opportunities will continue to be available.”
Paul Hunt, managing director of Phoebus Software said:
“The wider mortgage market suffered in the first part of the year from both bad weather and a tough economic climate. Although the buy-to-let mortgage market suffered too, it has proved far more resilient than the rest of the market. This should come as no surprise to those watching the rental market in the UK.
"While property prices are on a downward trajectory – largely as a result of caution among mortg
