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UK buy to let property sector improving slightly after battered 2009

There were 25,800 new loans advanced in quarter four, up from 23,700 in the third quarter but down from 38,000 in the fourth quarter of 2008.

The 2009 growth is from a very low base after a consistent decline through seven consecutive quarters, the CML said and volumes remain comparatively low, both in absolute terms and as a percentage of overall lending.

Overall the number of loans was down 58% on 2008 and 2009 saw the lowest annual volume since 2001.

All types of buy-to-let lending increased in the last three months of 2009.

But as with the mainstream mortgage market, loans continued to be advanced at about twice the rate of loans for remortgage with 62% of new buy-to-let loans being for house purchases.
For 2009 as a whole, 60% of buy-to-let lending was for house purchase, compared to just 46% in 2008, demonstrating an ongoing demand to increase residential investment portfolios if finance is available, the CML said.

The very low interest rate environment continues to benefit buy-to-let borrowers as the majority of mortgages are on an interest only basis.

This has a particular benefit for those in arrears, allowing many to recover their situation if they suffer short term voids or non payment of rent by tenants.
The number of landlords with arrears of more than 1.5% of the balance stayed the same in the fourth quarter at 20,700, but is 37% down from the 32,900 seen in the same period the year before.

The number of buy-to-let properties taken into possession in the fourth quarter fell by 25% from quarter three but rose 9% from quarter four 2008.

Some 1,200 properties, or 0.10% of the total buy-to-let book, were taken into possession compared to 1,600 in quarter three and 1,100 in quarter four of 2008.

Overall in 2009, there were 5,700 possessions, 0.46%, which was similar to the 0.42% annual possession rate for the wider mortgage market.

‘The figures show that the buy-to-let market continued to improve, albeit slowly, throughout 2009, and we are encouraged by this recovery.

The new business market remains well below previous levels though, and below the level of activity which is needed to enhance a vibrant private rental sector in the UK,’ said director general Michael Coogan.

‘We are concerned that future, wrongly directed, regulation may actually prevent buy-to-let playing its vital role in providing good quality homes and wider housing choices for people who cannot afford home ownership or do not qualify for social housing,’ he added.

Indeed, the contraction of the market in 2009 will have a significant impact on the4 supply of stock in the private rented sector, according to Ian Potter, Operations Manager of the Association of Residential Letting Agents.

‘There is some light at the end of the tunnel, with buy-to-let lending increasing for a second consecutive quarter at the end of 2009.

It is encouraging that the amount of remortgaging in the buy-to-let sector is decreasing, and this indicates that investors are taking a more long-term and pragmatic view,’ he said.

‘However, 48% of landlords surveyed by ARLA say that they do not expect to acquire more buy-to-let properties during 2010.

This is a stark reminder of the lack of available mortgage finance despite the billions of public money poured into the banking sector.

Unless the Government frees up further buy-to-let lending for responsible landlords who recognise the importance of investment in residential property, then the UK is going to struggle to house future generations,’ he added.