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Buy-to-let mortgage market shows signs of life

17 August 2009 / by Rachael Stiles

Buy-to-let mortgage lending showed signs of improvement in the second quarter, with fewer borrowers in arrears and a slow in the decline of lending.

The latest figures from the Council of Mortgage Lenders (CML) found that the buy-to-let mortgage market is showing "the first signs of stabilising", with lending falling just four per cent in the second quarter compared to more significant falls in previous quarters.

Buy-to-let lending has felt the effects of the credit crunch more keenly than other areas of the mortgage industry, due to its heavy reliance on wholesale funding, which has all but dried up, with fewer lenders in the market, which have less money to lend.

These conditions have led to seven consecutive months of decline in the buy-to-let mortgage market, leaving lending at very low levels.

The second quarter saw a five per cent increase in buy-to-let mortgage business for house purchase, but diminishing equity levels and tighter lending criteria continued to constrict remortgaging, which fell 15 per cent.

While buy-to-let loans accounted for 5.6 per cent of gross mortgage lending in the second quarter, compared to 1.9 per cent during the same period in 2008, there were reasons for cautious celebration, the CML figures show.

Falling interest rates have helped buy-to-let mortgage arrears to show "considerable improvement in all measures", the CML report said, with the number of landlords in arrears of three months or more down 17 per cent on the previous quarter's figures, and those in arrears of more than 1.5 per cent of their outstanding mortgage balance down 20 per cent since the end of April.

CML senior policy adviser, Rob Thomas, said the mortgage industry expects lower interest rates to continue to help landlords and reduce the number of lenders who are in arrears. But, he added "new lending to the buy-to-let market will continue to be constrained by the shortage of funding."

Ian Potter, operations manager of the Association of Residential Letting Agents (ARLA), said that the CML figures are "confirmation that things are starting to pick up for buy-to-let investors."

Stabilisation in the buy-to-let market is not only good for landlords, but tenants too, he said, who have little protection against repossession.

Keshav Thukaram, managing director of, said that the CML figures confirm the view of the buy-to-let property services website that the market has "bottomed out and is starting to recover - albeit slowly."

This should act as a wake-up call to lenders, he said, and encourage them to "tart lending more aggressively."

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