The figures confirm the trend which has been commented on for some time now by the buy to let industry and surveys are showing that more landlords want to increase their investment portfolios in 2013.
The CML figures show that at £16.4 billion, gross buy to let lending was 19% higher than the £13.8 billion advanced in 2011, reaching its highest level for four years.
On a quarterly basis, there were 36,700 buy to let loans, worth £4.6 billion, advanced in the fourth quarter, up from 34,300 loans worth £4.2 billion in the third quarter, and 34,200 loans worth £3.9 billion in the fourth quarter of 2011.
By number, a total of 136,900 buy to let loans were advanced during 2012 of which nearly half were for remortgage. The total number of buy to let mortgages outstanding at the end of 2012 stood at 1,445,300, accounting for 13% of all mortgages.
Lenders typically required a minimum 25% deposit on buy to let loans throughout 2012, with an average minimum rental cover requirement of 125%.
In terms of loan performance, 1.14% of buy to let loans ended the year in arrears of more than three months, compared with 2.03% of owner occupier loans.
On the other hand, the annual repossession rate at 0.48% was higher than the equivalent owner-occupier rate of 0.27%, reflecting the different considerations involved in the two sectors.
‘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,’ said CML director general Paul Smee.
Landlords who can demonstrate a strong track record are in a good position to expand their portfolios. However, new potential landlords need to tread carefully before entering the buy to let market. Considerations such as landlord licensing reinforce the need for potential landlords to gain a strong understanding of the legal and operating environment,’ he explained.
‘Looking ahead, we will find out later in the year whether or not buy to let lending ends up within the scope of mortgage regulation as a result of the European Directive currently being finalised. If this does happen, policymakers must ensure that the very clear differences between buy to let and owner-occupier lending risks and operations are fully recognised in any regulatory framework that may emerge,’ he added.
