Buy-to-let mortgage levels rising


rental property

Mortgage lending in the buy-to-let sector has reached its strongest level since 2008, banks and building societies have reported.

Better mortgage availability generally and continued high demand for rental homes from tenants have helped the sector to recover, the Council of Mortgage Lenders (CML) said.

It said that lenders advanced 40,000 mortgages worth £5.1 billion, to buy-to-let investors in the second quarter of 2013, marking the strongest figures seen since autumn 2008.

The level of loans advanced in the second quarter was around one fifth higher than in the preceding three months, although the CML said the increases seen have come from a "low base".
Mortgage availability generally has increased sharply and lenders have slashed their rates since the Government launched a scheme one year ago called Funding for Lending, which has revitalised much of the housing market by giving lenders access to cheap finance.

Meanwhile, continued strong demand from tenants has encouraged more aspiring landlords to consider the potential returns they could get for investing in the rental sector, at a time when low interest rates are giving poor returns on savings.

The CML's head of policy, Jackie Bennett, said: " Strong rental demand is contributing to the continuing expansion of the buy-to-let sector, but growth is also being helped by improved conditions in funding markets and more widespread availability of mortgages.

"These conditions are creating more opportunities for landlords to remortgage, as well as helping to fund increased activity in the mortgage market more generally. This spring, we have seen the highest levels of lending to first-time buyers since 2007, alongside the continuing recovery in the buy-to-let market."

Matthew Pointon, a property economist at Capital Economics, said that many would-be first-time buyers living in the rental sector are still finding it a "challenge" to make the jump onto the property ladder, which is helping to keep rental demand up. Low mortgage rates are also making the potential returns landlords could make more attractive.

He said: "Alongside a gentle recovery in overall mortgage lending, buy-to-let lending is also likely to continue its upward trend. But a return to the boom buy-to-let years of 2006 -2007 remains a distant prospect."

Mr Pointon said that tenants' squeezed budgets will prevent landlords being able to impose a "substantial" increase in rents and house price increases are unlikely to be enough to attract a "surge" of investor interest.

© 2013 Press Association