Buy-to-let buoyed by remortgaging

Buy-to-let lending has reached its highest level for four years, figures from the Council of Mortgage Lenders show, indicating that demand to borrow money from landlords remains strong.

However, the latest figures from the Council of Mortgage Lenders, the trade body for banks and building societies, also reveals half the cash is going to remortgages.

Landlord mortgages accounted for 11.5% of the total gross mortgage lending last year, up from 9.8% in 2011, showing increasing demand for buy-to-let loans.

Gross buy-to-let lending was £16.4 million – 19% higher than the £13.8 billion that was lent to landlords the previous year, the figures show.

The year finished on a strong point with 36,700 buy-to-let loans made, worth £4.6 billion, in the final three months. This was up from 34,300 loans worth £4.2 billion in the third quarter of 2012, and an increase on the 34,200 loans worth £3.9 billion made in the fourth quarter of 2011.

In numerical terms for the whole year, a total of 136,900 buy-to-let loans were made. Nearly half of these were for remortgage. At the end of 2012 there were 1,445,300 landlord mortgages in place – 13% of all mortgages.
Strong tenant demand

The proportion of buy-to-let loans in arrears of more than three months was 1.14%, compared to 2.03% for owner-occupier loans. But the annual repossession rate for landlords was 0.48% – higher than the owner-occupier rate of 0.27%.

Paul Smee, director general at the Council of Mortgage Lenders, said: “Buy-to-let is benefiting from strong tenant demand, which is likely to continue. Loan performance compares favourably with the owner-occupier sector, and the overall outlook for the buy-to-let sector is positive.”

He also pointed out that landlords with a strong track record are in a good position to expand their buy-to-let portfolios. However, landlord licensing highlights the need for them to have a solid understanding of the market, Mr Smee continued.

Looking ahead through 2013, landlords may face issues if buy-to-let mortgage regulation is included in a European Directive for mortgages that is undergoing finalisation. If this goes ahead, policymakers will have to ensure that the differences in lending risks and operations between buy-to-let and owner-occupier mortgages are recognised within the regulations, he explained.


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