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Council of Mortgage Lenders
Buy to Let Lending
Buy to Let Regulation
Over 11 per cent of all mortgages in Britain last year went towards buy to let mortgages according to a new report from the Council of Mortgage Lenders.
The report shows that gross buy to let lending was £16.4 billion last year, which is not only an increase of 19% compared to the £13.8 billion recorded in 2011, but is also the highest level recorded in 4 years.
In Q4 investors borrowed £4.2 billion in 34,300 buy to let loans. This is down slightly on Q3's £4.6 billion in 36,700 but up on the £3.9 billion borrowed across 34,200 loans in Q4 last year. In the year as a whole investors took out 136,900 buy-to-let loans (almost half of which were remortgages).
At year end 1,445,300 buy to let loans were left outstanding, some 13% of all mortgages according to the CML report. Of this 1.14% 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.
The average loan to value in the buy to let sector is 75% according to the report and banks are asking for at least 125% minimum rental cover.
CML director general Paul Smee comments:
"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.
"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.
"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."
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