The number of buy-to-let loans has fallen by 15% to 22,000 in Q1, following an increase in buy-to-let activity at the end of last year.
Figures from the Council of Mortgage Lenders show that there was an upturn in the number of buy-to-let investors at the end of last year ahead of the end of the Stamp Duty holiday in December.
The CML says that with the exception of the Stamp Duty holiday, buy-to-let lending has remained broadly flat over the last five quarters.
The number of buy-to-let loans for Q1 represents a fall of just 2% from the same time last year, though the value of buy-to-let lending has declined by 12% over the first three months of the year to £2.1bn.
Arrears on buy-to-let loans are improving, helped by the last 15 months of low interest rates.
The number of loans in arrears more than 1.5% of the mortgage balance has gone from 20,700 loans as at the end of 2009 to 19,300 as at the end of March.
This equates to 1.56% of all buy-to-let loans.
But repossessions have risen from 1,200 in Q4 to 1,400 in Q1.
Michael Coogan, director-general at the CML, says: “Ignoring the effect of the Stamp Duty holiday, the lending figures show that the buy-to-let market has settled into a period of stable, low-volume activity.
“Generally, prospects for the rental market are good. But uncertainty over house prices, interest rates and the availability of mortgage funding is continuing to hold back the buy-to-let market at this stage.”
He adds: “We want to see how the new coalition government takes forward the Treasury’s initiative to encourage higher investment in the private rented sector, bearing in mind the scope for growth that exists to meet future demand from tenants.
“There is a case for targeted measures in the Budget, even though the primary focus will be the fiscal deficit.”
David Whittaker, managing director of Mortgages For Business, says: “This fall in activity isn’t as negative as it appears on the surface.
“We expected there to be a rush on buy-to-let mortgages at the end of last year and a subsequent drop in activity coming into Q1 2010.”
He is encouraged by lenders such as The Mortgage Works introducing an 80% LTV, and talk of new buy-to-let lenders entering the market.
“He adds: “The increase in LTVs and new money entering the market might not be reflected in Q2’s figures, but the activity numbers will look a lot stronger moving into the second half of the year.
“The future is certainly looking a lot brighter for the buy to let sector.”