Record figures for outstanding buy-to-let mortgages

14 August 2007
Data provided by The Council of Mortgage Lenders (CML) has revealed that 171,800 borrowers took out new buy-to-let mortgages in the first half of 2007, with a total value of £21.2 billion.

Although this was 3% lower than the number taken out in the last six months of 2006, the value of buy-to-let loans in the 2007 period rose approximately 2%, due primarily to increased property prices.

As a result of the higher property prices and continued confidence within the sector, lenders have increased the typical maximum aggregate loan value for single investors to £2.5 million.

CML views growth within the sector as a positive development. Its newsletter states: “Growth in the buy-to-let market has helped improve the quality of housing in the private sector.”

“In 1996 just 30.4% of homes in the private rented sector met the government’s decency standard. By 2006 this figure had increased to 48.1% and is probably even higher now,” it reports.

Despite a comparably slow start to the year, the buy-to-let market has performed better than the general mortgage market, which fell 4% overall. Figures show that buy-to-let lending now comprises 10% of mortgage balances, up from just 3% in 2002.

According to CML, the number of outstanding buy-to-let loans hit a record level of 938,500 by the end of the six-month period. These loans also reached record levels in terms of value, up 14% compared with the second half of 2006 to £108 billion.

A number of contributing factors has led to increases in the buy-to-let sector including higher rents and fewer periods when properties are unoccupied. As a result, arrears were lower than those in the mainstream mortgage market, with the number of buy-to-let mortgages in arrears of more than three months up just a fraction to 0.63% compared with 0.58% in the second half of 2006. This compares favourably with the wider mortgage sector, for which arrears totalled 1.06%.

Possessions of buy-to-let properties, at 0.08%, were also lower than in the wider mortgage market (0.12%), although they were up marginally from 0.06% in the previous six-month period.

Find out about by-to-let mortgages .