Buy-to-let lending rose by 12% in Q3 2010, data published today by the Council of Mortgage Lenders reveals, and it is supported by ongoing demand for rental property against the backdrop of a dysfunctional owner-occupier market.
There were 26,900 buy-to-let loans advanced in Q3 worth £2.8bn. This quarterly rise of 8% by volume and 12% by value is the second consecutive quarterly increase in lending.
Compared to Q3 2009, the volume of lending was up 14% and the value up 33%, from 23,700 and £2.1bn 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.
Michael Coogan, director-general of the CML, says: “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.”
Nigel Terrington, chief executive of Paragon Group, says: “The 12% rise in gross advances is encouraging and reflects an increased level of confidence amongst landlords and lenders in the buy-to-let market. Tenant demand is extremely strong and the private rented sector needs to expand to cope with the increased numbers of people wanting to live in rented homes.
“Therefore, it is pleasing that the value of loans for house purchase hit its highest level since the final quarter of 2008 and the volume of loans rose for the third successive quarter. Although we are still a long way from normal market conditions and lending is low by historical standards, the market is heading in the right direction and is growing again.”