It means that the value of buy to let lending in the first nine months of 2012 amounted to £11.8 billion, 19% higher than the £9.9 billion advanced over the same period in 2011.
But the CML pointed out that buy to let activity is recovering from a low base and remains subdued compared to the pre-credit crunch era. Buy to let lending this year is likely to total a little over a third of its peak in 2007.
Lenders advanced 18,680 loans for house purchase, 54% of the total, and 15,360 for remortgaging, 45% of the total. By value, lending was evenly split, with £2.03 billion advanced for house purchase and an identical sum lent for remortgaging.
The average maximum loan to value available on buy to let mortgages remained at 75%, with an average minimum rental cover of 125%. Both measures have remained largely unchanged for more than three years.
The stock of buy to let mortgages continues to grow. At the end of the third quarter, the number of outstanding loans totalled 1,444,000, worth £164.3 billion, up from 1,414,000, worth £162.5 billion, at the end of the second quarter, and from 1,367,000, worth £156.7 billion, a year earlier.
As a proportion of the mortgage market overall, buy to let lending remains lower than in 2007 and 2008. Despite the fluctuating fortunes of the mortgage market in the last few years, the market shares of three distinct groups of borrowers; buy to let investors, home movers and first time buyers, have remained broadly stable.
‘Buy to let lending is continuing to recover, and to grow in line with expectations. As well as continuing to fund owner occupation, lenders are contributing to the expansion of a strongly growing rental sector, helping to deliver choice and mobility for tenants,’ said , CML director general Paul Smee.
‘The growth of private renting looks set to continue in the years ahead, and lenders are committed to playing a full part in the debate about how best to meet the evolving needs of tenants in the future,’ he added.
The data also showed that the number of mortgage possessions fell again in the third quarter of 2012. A total of 8,200 properties were taken into possession in the third quarter, down from 8,500 in the second quarter and 9,600 at the same time last year. This marked the lowest number of properties taken into possession in a single quarter since 2007.
The number of mortgages in arrears remained stable in the third quarter. At the end of September, the total number of mortgages with arrears of 2.5% or more of the outstanding balance rose slightly to 159,100, up from 158,700 in the previous quarter but still down on the 165,300 in arrears in the same period last year.
A total of 26,300 properties were taken into possession in the first three quarters of 2012, 8% fewer than in the first three quarters of last year. While the repossession rate equated to 0.13% in the buy to let sector, the rate was just 0.06% in the owner occupier sector, resulting in an overall repossession rate of 0.07% in the quarter.
In the buy to let sector, repossession is only likely to occur at the end of an agreed tenancy, when the landlord is in arrears. In the owner occupier sector, repossession is a last resort and the low rate of repossession reflects significant lender forbearance.
‘Our figures show that good communication and effective arrears management by borrowers, lenders and money advisers are helping the vast majority of those with mortgage repayment problems. The rate of repossession has continued to fall and it’s clear that lenders want to keep people in their homes,’ explained Smee.
‘Repossession really is a last resort but it’s essential for anyone worried about their mortgage to talk to their lender as soon as possible – it is more difficult to resolve problems when they are not tackled early,’ he added.
Landlords are the big winners in the current market, according to David Whittaker, managing director of Mortgages for Business. ‘Lending to owner occupiers is still some 4% lower than last year leaving demand for rented accommodation undiminished,’ he said.
‘This demand continues to push up rents and keeps first time buyers locked out of the sales market. Low sales activity has suppressed property prices and encouraged further buy to let investment. With the rates of return currently available it’s unlikely we’ll see a drop in BTL activity over the next twelve months,’ he explained.
‘Gross yields rose on all property types apart from semi commercial over the last quarter, with vanilla buy to let yields increasing from 6.1% in the second quarter to 6.7% meaning even landlords uninterested in getting involved in more complex investments have the opportunity for healthy returns,’ he added.
However, Nick Hopkinson, director of property company PPR Estates, believes that the major banks and mortgage lenders are still struggling to hide the real extent of their reckless lending prior to 2008 by showing previously unheard of levels of forbearance towards struggling borrowers in arrears.
‘They are desperately trying to keep people in their houses. This is not being done to help borrowers but simply to protect previous bonuses and share prices by avoiding having to revalue their entire loan books as a result of the actual sales prices they would achieve on repossessed stocks,’ he said.
‘The number of home owners in arrears continues to rise, even after over three years of the lowest interest rates in history. It is difficult to see how allowing these borrowers to fall further and further behind is really a help amidst the current economic uncertainty,’ he added.
He also pointed out that many tens of thousands of home borrowers are also trapped in a negative equity nightmare. ‘This lack of mobility and house market liquidity is bad for the wider economy and is simply storing up bigger financial debts for borrowers and potentially bigger losses for the banks,’ he explained.
‘Household incomes are going to continue to be squeezed as we go into 2013, with rising fuel costs and further austerity measures assured. Against this backdrop, it is almost inevitable that house prices will continue to drift downwards next year,’ he added.
While lenders are striving to be flexible and understand their customers’ detailed circumstances repossessions won’t show the sustained falls that came with the new millennium, according to Mark Blackwell, managing director of xit2.
‘October 2012 is probably the beginning of the end of the latest good news. Many lenders are now increasing SVRs in line with inevitable base rate rises and tighter money markets. Flat overall arrears levels are impressive in the circumstances, but there are now 48% more borrowers in long-term arrears than there were in the middle of 2008,’ he said.
‘This is the fourth consecutive quarter where serious arrears cases have increased, but repossessions continue to head in the opposition direction. It’s counter-intuitive, and a trend that can’t possibly continue indefinitely,’ he added.
Meanwhile, Stuart Law, chief executive of Assetz, thinks that the buy to let sector is in rude health. ‘We are seeing thousands of new investors register with us every month. The average loan to value of 75% available on buy to let mortgages is not a hindrance to investors as generally speaking they are looking for a safe place to put their cash that will produce a healthy and reliable return and mortgages are used tactically on modest loan to values to enhance long term capital growth potential,’ he said.
‘We have seen substantial transaction growth every quarter over the last three years and expect this to continue for the foreseeable future given the appalling bank savings rates on offer,’ he added.
