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Positive outlook for UK buy to let sector as loans increase, says CML

During the fourth quarter of 2011, a total of 34,800 buy to let mortgages, of which 15,600 were remortgages, were advanced, with a total value of £4 billion.

This was virtually identical to the volume of business in the third quarter when there were 34,300 loans worth £4 billion, but up on the fourth quarter of 2010 when there were 26,300 loans worth £2.9 billion.

Compared with the height of the market in the third quarter of 2007, when quarterly lending totalled over 93,000 loans worth £12.7 billion, the buy to let market continues to operate at relatively subdued levels, but it is clearly continuing to recover from its low point in 2009, said the CML.

Buy to let mortgages account for nearly 13% of the total outstanding value of mortgages in the UK and buy to let lending represented nearly 11% of total gross mortgage lending in the fourth quarter of 2011.

The arrears performance of buy to let loans is better than the owner occupier market but the repossession rate is higher. This should be no surprise. For obvious reasons, lenders make particularly strenuous efforts to show forbearance over sometimes very extended periods to home owners to try to help them keep their homes wherever realistically possible, the CML explained.

It assed that this is a less marked imperative in the buy to let sector where greater fluidity over shorter timescales is normal. Provided the landlord has a bona fide buy to let mortgage and tenancy is recognised by the lender, the tenant's rights are unchanged even if their landlord does default.

‘Buy to let lending continues to perform well. Demand for rented property remains high, so the rationale for buy to let remains strong, and there is little reason to foresee any change to this positive outlook for the sector,’ said CML director general Paul Smee.

‘These figures do not suggest that buy to let is crowding out first time buyers; more that it is performing a really important role within the overall housing market. The benefits of the availability of good quality, private rented housing should not be overlooked, especially as there are many households which need the flexibility and mobility that the private rented sector is well placed to provide,’ he added.