Date: 11/11/2010
BTL shows signs of recovery

Buy-to-let lending rose by 12% in the third quarter, according to data published today by the Council of Mortgage Lenders. Supported by ongoing demand for rental property against the backdrop of the owner-occupier market.

There were 26,900 buy-to-let loans advanced in the third quarter, worth £2.8 billion. This quarterly rise of 8% by volume and 12% by value is the second consecutive quarterly increase in lending.

Compared to the third quarter of 2009, the volume of lending was up 14% and the value up 33%, from 23,700 and £2.1 billion respectively. Buy-to-let lending is low by historical standards - running at levels last seen in 2002 - and the market will likely continue to show growth into 2011.

At the end of September, there were 1.29 million buy-to-let mortgages outstanding, an increase of 7% from the previous quarter. The proportion of loans in arrears of more than 1.5% of the balance remains broadly unchanged at 1.45%, while repossessions (at 0.12%) and the appointment of receivers of rent (at 0.10%) were also virtually unchanged from the previous quarter.

Buy-to-let demand appears likely to increase, which is unsurprising in an environment where the demand for rental property will be boosted by the access problems that first-time buyers face in the owner-occupier market.

James Scollard, proprietor of CLIFFTONS in Bournemouth comments “Property investors are back in the housing market taking advantage of lower house prices and higher rental demand; it’s frustrating when I hear first time buyers holding back. I don’t see the logic I’m not buying now because house prices are falling. The figures that are produced on House prices are generally three to six months old, so by the time it hits the newspapers and television that house prices are dropping is a key indicator to take advantage of buying properties at a lower price.

Now is a fantastic time to be buying your own home. The Quantitative easing (a monetary policy used by some central banks to increase the supply of money) is taken when other avenues have been exhausted, like lowering interest rates and is designed to artificially create inflation or reduce deflation by eroding the real value of each unit of the functional currency. People who have saved money or are holding any monetary item will find its real value eroded by inflation; however those who have negative savings (debt) will see the real value of that debt decline.

Commenting on the figures, CML director general Michael Coogan said:

"We would expect buy-to-let demand to pick up further if current rising rental trends continue and house prices remain broadly stable. However, there is short term uncertainty as a result of the unresolved debate on housing benefit and landlords' response to new limits.

"The bigger question is whether there will be sufficient supply side capacity to meet that demand, as the number of buy-to-let lenders dwindled in the credit crunch after 2007 and is yet to be fully restored.

"However, it is clear that in a market where access to home-ownership has become more difficult, the private rental sector is experiencing, and will continue to benefit from, high levels of demand for good quality housing."