UK buy to let lending is on the rise, latest figures show

According to the Council of Mortgage lenders, in the UK the buy to let mortgage sector is springing back to life due to strong demand and is growing as an overall proportion of the property lending market.

The most recent CML statistics show that gross mortgage lending of £4.2 billion across 33,500 mortgages were given to buy to let landlords in the first three months of 2013. This continues from £4.6 billion the previous quarter and £3.7 billion in the first quarter of 2012.

Almost half of this lending was to remortgage, rather than house purchase. Even so, the buy to let market continued to grow, and loan performance improved, said CML director general Paul Smee.

By the end of March buy to let lending had amounted to 13.4% of the 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 approximately 1.46 million buy to let mortgages in the UK, equaling about 13% of the 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.

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