Buy to let mortgage lending sees first growth for 2 years

12 November 2009 / by Rachael Stiles

Buy to let mortgage lending grew in the third quarter for the first time in two years, the latest figures from the Council of Mortgage Lenders show.

Total lending for quarter three rose by 10 per cent, and buy to let mortgage lending rose by a similar amount, the CML report said, increasing from 21,600 loans in the second quarter to 23,700.

While the increase in buy to let lending will come as a welcome sign of recovery for the market, it marks only a slight recovery from the lows of recent years, with current lending volumes still significantly lower than at their peak in 2007.

The total number of buy to let loans grew to 1,205,000, an 11 per cent share of the mortgage market, with an outstanding value of £144.2billion – an increase of 2.5 per cent on the previous quarter.

The third quarter saw growth in buy to let mortgage lending for both house purchase and remortgaging, with the proportion of house purchases significantly higher, in line with the wider mortgage market.

Remortgaging remained constrained due to the continued lack of availability of buy to let mortgages for anything more than 80 per cent loan to value; landlords with existing mortgages at a higher LTV are being forced to remain with their existing mortgage, but the CML explained that this is not a great disadvantage while variable interest rates remain low.

Meanwhile, the number of landlords in arrears of more than 1.5 per cent of their loan balance decreased for the third consecutive quarter, due to the falling cost of borrowing.

Commenting on the data, Michael Coogan, the CML's director general, said: "At this stage, the recovery is modest – but the figures show that buy-to-let is here to stay. Buy-to-let lenders are among those facing some of the biggest challenges in raising mortgage funding, so the improved figures are all the more welcome."

Predicting what is to come for the mortgage market, Mr Coogan said that "Future demand for housing in all tenures supported by lenders will remain strong, despite mortgage funding constraints and low construction rates."

Remarking on what the future might hold for the buy to let mortgage market, he added: "With funding for social housing under pressure, the private rented sector has a strong future. Mortgage lenders will have an important role to play in it, and will continue to help improve choice and standards for private tenants."

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