The value of buy-to-let mortgages taken out in the third quarter of 2012 totalled £4.2 billion, an increase of 8% over the £3.9 billion advanced in the preceding three months, according to data published today by the Council of Mortgage Lenders. The number of loans advanced in the three months to the end of September totalled 34,400, 2% more than in the second quarter of 2012 (33,600).
Today’s data means that the value of buy-to-let lending in the first nine months of 2012 amounted to £11.8 billion, 19% higher than the £9.9 billion advanced over the same period in 2011. But buy-to-let activity is recovering from a low base and remains subdued compared to the pre-credit crunch era. Buy-to-let lending this year is likely to total a little over one-third of its peak in 2007.
The balance between buy-to-let lending for house purchase and remortgaging in the third quarter remained broadly unchanged. Lenders advanced 18,680 loans for house purchase (54% of the total) and 15,360 for remortgaging (45%). By value, lending was evenly split, with £2.03 billion advanced for house purchase and an identical sum lent for remortgaging.
The average maximum loan-to-value available on buy-to-let mortgages remained at 75%, with an average minimum rental cover of 125%. Both measures have remained largely unchanged for more than three years.
The stock of buy-to-let mortgages continues to grow. At the end of the third quarter, the number of outstanding loans totalled 1,444,000, worth £164.3 billion (up from 1,414,000, worth £162.5 billion, at the end of the second quarter, and from 1,367,000, worth £156.7 billion, a year earlier).
Loans for house purchase: buy-to-let, first-time buyers and home movers
Source: CML Research
As a proportion of the mortgage market overall, buy-to-let lending remains lower than in 2007 and 2008. Despite the fluctuating fortunes of the mortgage market in the last few years, the market shares of three distinct groups of borrowers – buy-to-let investors, home movers and first-time buyers – have remained broadly stable.
Commenting on the data, CML director general Paul Smee said:
“Buy-to-let lending is continuing to recover, and to grow in line with expectations. As well as continuing to fund owner-occupation, lenders are contributing to the expansion of a strongly growing rental sector, helping to deliver choice and mobility for tenants. The growth of private renting looks set to continue in the years ahead, and lenders are committed to playing a full part in the debate about how best to meet the evolving needs of tenants in the future.”
Jonathan Samuels, CEO of Dragonfly Property Finance, said:
“With rental demand strong and house prices still depressed in much of the country, property professionals are flocking to buy-to-let.
“For many investors the arithmetic has an irresistible logic. Good value property and buoyant rental values mean there is money to made once again.
“Such steady growth in both the number and value of buy-to-let loans is one of few bright spots for a mortgage market that still remains a shadow of its former self.
“Buy-to-let’s share of the mortgage market is slowly increasing too, as property investors are among the most bullish about the housing market’s prospects.
“The mainstream lenders’ continued reluctance to ease their lending criteria or reduce interest rates on high LTV loans is stoking rental demand – and by extension boosting buy-to-let demand.
“It isn’t quite robbing Peter to pay Paul, but perhaps unwittingly the industry is shifting focus back to buy-to-let.”