The latest CML figures show that gross mortgage lending of £4.2 billion across 33,500 mortgages was advanced to buy to let landlords in the first quarter of 2013. This follows on from £4.6 billion the previous quarter and £3.7 billion in the first quarter of last year.
Nearly half of this lending was for remortgage, rather than house purchase. Nevertheless, the buy to let sector continued to grow, and loan performance improved, said CML director general Paul Smee.
By the end of March buy to let lending accounted for 13.4% of total outstanding mortgage lending in the UK, up from 13% the previous quarter and 12.9% at the end of the first quarter of 2012.
The CML said that there are now around 1.46 million buy to let mortgages in the UK, accounting for around 13% of the total estimated stock of 11.26 million mortgages.
‘The buy to let mortgage market is performing well, against a backdrop of robust landlord and tenant demand for good quality rental property. Loan performance compares favourably with the owner-occupier sector, and buy to let continues to grow as a proportion of the overall mortgage market,’ said Smee.
‘As the private rented sector looks likely to be the longer term tenure in which more households may live in the future, lenders are actively looking at how they can best evolve their future lending for those landlords who may wish to offer longer term tenancies to their tenants, although concrete landlord demand for such borrowing is not yet clear,’ he added.
‘The economy may be firing blanks but the buy to let market is going great guns. High yields, stagnant property prices and improved financing options are encouraging investors to add to their portfolios,’ said David Whittaker, managing director of Mortgages for Business, a specialist buy to let mortgage broker.
‘Life might have become marginally easier for first time buyers in the last six months, but only marginally. Their life was already about as miserable as it could get. The flow of first time buyers is still barely a trickle, which is sending the excess demand directly into in the rental sector and keeping yields high for buy to let investors. Landlords are understandably trying to take full advantage of the returns on offer, which is why we’ve seen an increase in the number of buy to let investors trying to refinance in the first quarter as they look to expand their portfolios,’ he pointed out.
‘This activity has been helped by increased competition between the buy to let lenders. Rates and fees are down and there are increasing options for landlords looking to finance more complex deals. The Funding for Lending Scheme too has helped by loosening the supply of credit to lenders, and they are passing the savings on to investors,’ he added.
According to Brian Murphy, head of lending at Mortgage Advice Bureau (MAB), poor savings rates have sparked interest in the buy to let market as investors look to capitalise on growing tenant demand and strong long term returns.
‘The increase in demand for privately rented property reflects the growing appeal of flexible living arrangements far from being a second best option. Renting can often compliment the lifestyle of many people with changeable personal circumstances, especially those with roaming work locations and seasonal commitments,’ he explained.
‘Thanks to the Help to Buy scheme, we can expect fewer people in a situation where they feel forced to rent leaving remaining tenants satisfied renting best suits their needs,’ he added.
Christopher Down, chief executive of Hearthstone Investments, believes that the figures are highly encouraging but he warned that lending conditions continue to act as a barrier for some who seek to enter the residential buy to let market. ‘Although those struggling to secure a mortgage can still capitalise on upturns in this market without having to physically own a property, by investing in a diversified and regulated fund. This provides all of the advantages of buy to let, without the significant time and financial commitments,’ he said.
Strong buy to let lending growth is a great confidence boost to the property market which has started the year showing great fighting spirit, according to haart chief executive officer Paul Smith.
‘Landlords are rightly seeing the opportunities to be had with the booming rental market and are taking positive steps to grow their portfolios and lenders seem keen to support them. While first time buyers are still getting to grips with the latest government help and picking their way through the best mortgage deals, rentals will inevitably remain strong,’ he added.
