BM Solutions and TMW took 80% of the B2L lending market in 2009

Just two lenders accounted for 80% of buy-to-let lending last year, research from Datamonitor shows.

Its report, Buy-to-Let Mortgages And The Rental Sector, shows Lloyds Banking Group’s BM Solutions and Nationwide Building Society’s The Mortgage Works took the lion’s share of gross buy-to-let lending in 2009.

Of the total £8.5bn gross buy-to-let lending advanced last year BM Solutions accounted for some £4.6bn while TMW lent about £2.3bn.

Nigel Terrington, chief executive of The Paragon Group, says: “Buy-to-let lending hit its lowest level since 2001 last year and the market was dominated by just two lenders.

“Investor demand has never been the issue – it’s always been about mortgage finance, which has been restricted since the closure of the wholesale funding markets.”

And a spokesman for the National Landlords Association says: “A lot of lenders got out of the market in 2007 and last year there was a limited supply of mortgage products for any type of landlord, particularly for new entrants.

“But buy-to-let is still a niche product in many ways and I suspect that as the credit markets open up we will see more lenders entering the sector.”

Despite the lack of buy-to-let lenders Datamonitor is confident that the sector will see a boost in the next few years.

The firm estimates that gross buy-to-let lending will stay flat at £8.5bn this year before rising to £15.8bn in 2012, £20.2bn in 2013 and £25.6bn in 2014.

It says a surge in the buy-to-let market will emerge as house prices and rents stabilise, given that buy-to-let arrears are no higher than the rest of the market.

Terrington adds: “A number of socio-economic and demographic factors will drive demand for rented property in the future such as inward migration, the rate of new household formation and the composition of those households, growing student numbers and a greater propensity to rent among young people.”