The buy-to-let market rocketed last year, according to the latest data from the Council of Mortgage Lenders.
At the end of last year there were an estimated 1.3 million buy-to-let mortgages outstanding, worth £152bn, accounting for 12% of the total value and 11.5% by number of mortgages outstanding.
The total value of buy-to-let lending in 2010 was £10.4bn (22% higher than in 2009), and the total number of loans advanced in the year was 102,000 (10% higher than the previous year).
In the fourth quarter of 2010 there were 28,600 new buy-to-let loans advanced, worth £3bn. This was a rise of 6% by volume and 7% by value from the third quarter.
In terms of loan performance, the buy-to-let sector has seen a further improvement in the number of mortgages in arrears.
While direct comparisons with the owner-occupied sector are difficult because of the additional option of appointing a ‘receiver of rent’ on a buy-to-let loan, the CML says that the share of arrears cases accounted for by buy-to-let loans is now only just over the overall buy-to-let share of the mortgage stock, having previously been notably higher than the owner-occupied sector.
Low interest rates are a key driver of this narrowing of the gap, since the largely interest-only buy-to-let sector gains greater benefit from lower interest payments than the predominantly capital-and-interest owner-occupied sector.
Looking ahead to the prospects for the buy-to-let sector, the CML expects strong rental demand to remain, driven not least by the continuing deposit constraints to entry to the owner-occupier market.
CML director general Michael Coogan said: “Funding remains a key constraint on growth in buy-to-let lending, but demand seems to be resilient and loan performance has improved. Looking ahead, loan performance could potentially be adversely affected by rising rent arrears or interest rate rises, but at present there is no indication of these pressures materialising in practice.
“There is also a strong counterbalancing growth influence on the buy-to-let market, as tenant demand seems set to remain high in the face of continuing deposit constraints to entering the owner-occupier market."
David Whittaker, managing director of Mortgages For Business, said: “If Merlin were around today he’d swap the wand and pointy hat for an investment portfolio and a range of assured shorthold tenancies, because the signals for the buy-to-let market are very encouraging.
“Last year was a good year for the sector and conditions are set for the magic to continue, thanks to the Arthurian wizard’s namesake project.
“Banks will have to lend more this year, and who better to lend to than professional investors with large deposits and proven track records of repayment?”
Paragon Group chief executive Nigel Terrington was also delighted, saying: “This is an encouraging set of figures and shows that the buy-to-let market is on the front foot again and entering a period of growth.
“A number of new lenders entered the buy-to-let market in 2010 and, of course, Paragon also returned to new lending, creating competition and choice for landlords.
“It is important that landlords have access to suitable finance to enable them to grow their property portfolios.
“The UK is experiencing unprecedented levels of tenant demand and the private rented sector needs to expand. Capital Economics estimates that the private rented sector will be home to nearly one in five households by 2015, up from one in seven currently, so it is crucial that the UK has a vibrant and healthy buy-to-let market.”
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Comments
Richard, I'd love to be as well organised as you & have a portfolio with enough income to not work, just brilliant, well done, I'm frankly resepectfully envious.
But there is a risk to the more amateur landlord with a portfolio of one or two, who is carrying a high mortgage. Some of these types take out interest only for a buy to let, and hope to heck that mortgage rates stay low, rents stay high and house values go up. At times that does happen but now does not seem to be the time and I'm concerned for the amateur landlord with high mortgage exposure in a situation where mortgage rates will probably go up, but house prices and rents will not, in the short term. Some seem to be very exposed.
The general risk too is that where these landlords get into trouble there will be distressed sales of these rental properties, which may further hold back price stability. I hope not.
Simon- I bet you would like a portfolio but cant afford one! I am happy with muppets like you paying me rent so I don't need to work. Golf handicap down to 6 now, thanks.
HPC Ninny alert!
Basically simon you are wrong! There are a pile of threads on here that will tell you why.
I wouldn't like to have a buy to let portfolio at this time. Rents have started falling again and house prices have been falling for some time. With high unemployment, higher taxes, higher inflation and big cuts to housing benefits buy to let looks extremely dangerous.
Paragon itself has always got their predictions wrong and went bust in the last recession and struggling in this one.
Yes LAST year buy to lets was the rage & rents soared too. But this year all signs seem to be that buy to let mortgage rates will be on the up but rental returns down. So I think this headline is very time expired.
Regarding Terry's sweet remark "I hate estate agents, a real f**king cancer on society." People are most welcome to buy or sell a house without using an agent, but good luck to you. It sometimes works smoothly but in my experience usually does not. If it was as easy as buying/selling a used car people would not use agents. Believe it or not the vast majority of us are ethical & work hard for our client (the seller) and do our best to be fair to the buyer. If your are a seller and your life skills are poor you may select a bad agent but most people have the ability to tell between good and bad.
A bad agent has usually been beaten down to a very low fee at which service cannot be properly provided. Pick a busy agent & don't go for a cheap one, or one who is so weak they agree whatever low fee you demand.
If you are a buyer and you think the agent is bad, tell the agent and perhaps the vendor why you think that way. Good agents want bad agents put out of business, so you can help.
Meanwhile the latest figures show under 200,000 first time buyers over the course of a year. Compare this to 600,000 a decade ago.
Meanwhile ONS figures show that more than 70 per cent of homeowners have lived in their property for more than five years, a figure that is expected to keep on growing.
FTBs not buying, homeowners not moving up the ladder.
I think Merlin would keep his wand and pointy hat