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Buy to let increases share of the market
(The Birmingham Post Via Thomson Dialog NewsEdge) Buy-to-let borrowing hit record highs in the first six months of the year, new figures revealed.
The number of loans climbed 17 per cent from the second half of 2005 to 152,500 with collective value increasing 20 per cent to pounds 17.5 billion, the Council of Mortgage Lenders said yesterday.
Lenders advanced 152,500 loans in the first six months, up 17 per cent from the second half of 2005.
There are thought to be 767,000 outstanding UK residential buy-to-let mortgages, worth pounds 83.9 billion.
The buy-to-let market has expanded far more markedly than the wider market.
The residential investment mortgage market accounts for eight per cent of UK lending, compared to seven per cent in the first half of 2005.
But there were signs of a pick up in bad loans.
The proportion of buy-to-lets in arrears of three months or more rose, from 0.68 per cent to 0.73 per cent in the first half.
However arrears stayed lower than in the wider market, where 0.96 per cent of borrowers were three months or more in arrears.
The CML said underwriting criteria remained unchanged with the average maximum loan-to-value at 85 per cent and lenders requiring rental income to exceed mortgage repayments by at least 25 per cent.
Michael Coogan, director general of the CML, said: "The buy-to-let market remains robust, underpinned by rental demand.
"But investors have shown they are quick to adjust to changing market conditions, so the view interest rates are now on an upward trend is likely to cause the rapid growth of buy-to-lets to slow.
"Fundamentally the rental market remains sound and looks set to continue to offer good prospects."
Analysts say buy-to-let is an area that could be unfazed by higher borrowing as more first-time buyers opt to rent.
"Although the threat of further increases may test investors' mettle, we believe stretched affordability and rising wages will support tenant demand," said Kelvin Davidson, property economist at Capital Economics.
Copyright 2006 Birmingham Post & Mail Ltd.
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