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CML Report Shows Stability in Buy to Let Lending

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United Kingdom  Council of Mortgage Lenders  Buy to Let Lending  CML  Buy to Let Regulation  Paul Smee 

CML Report Shows Stability in Buy to Let Lending

By - Monday 25 February 2013

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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