Buy-to-let lending accounted for 11.5% of total gross mortgage lending in 2012, up from 9.8% in 2011, according to full-year data released today by the Council of Mortgage Lenders. At £16.4 billion, gross buy-to-let lending was 19% higher than the £13.8 billion advanced in 2011, reaching its highest level for four years.
On a quarterly basis, there were 36,700 buy-to-let loans, worth £4.6 billion, advanced in the fourth quarter - up from 34,300 loans worth £4.2 billion in the third quarter, and 34,200 loans worth £3.9 billion in the fourth quarter of 2011.
By number, a total of 136,900 buy-to-let loans were advanced during 2012 (of which nearly half were for remortgage). The total number of buy-to-let mortgages outstanding at the end of 2012 stood at 1,445,300, accounting for 13% of all mortgages.
Lenders typically required a minimum 25% deposit on buy-to-let loans throughout 2012, with an average minimum rental cover requirement of 125%.
In terms of loan performance, 1.14% of buy-to-let loans ended the year in arrears of more than three months, compared with 2.03% of owner-occupier loans. On the other hand, the annual repossession rate at 0.48% was higher than the equivalent owner-occupier rate of 0.27%, reflecting the different considerations involved in the two sectors.
CML director general Paul Smee comments:
"Buy-to-let is benefiting from strong tenant demand, which is likely to continue. Loan performance compares favourably with the owner-occupier sector, and the overall outlook for the buy-to-let sector is positive.
"Landlords who can demonstrate a strong track record are in a good position to expand their portfolios. However, new potential landlords need to tread carefully before entering the buy-to-let market; considerations such as landlord licensing reinforce the need for potential landlords to gain a strong understanding of the legal and operating environment.
"Looking ahead, we will find out later in the year whether or not buy-to-let lending ends up within the scope of mortgage regulation as a result of the European Directive currently being finalised. If this does happen, policymakers must ensure that the very clear differences between buy-to-let and owner-occupier lending risks and operations are fully recognised in any regulatory framework that may emerge."
DOCUMENTS AND CHARTS AVAILABLE HERE
MM6 – Buy-to-let market summary
MM17 – Buy-to-let gross advances
AP5 – Buy-to-let arrears and possessions
AP7 – Comparison of arrears in the buy-to-let and wider mortgage markets
AP8 – Comparison of possessions in the buy-to-let and wider mortgage markets
NOTES TO EDITORS
1. The Council of Mortgage Lenders’ members are banks, building societies and other lenders who together undertake around 95% of all
residential mortgage lending in the UK. There are 11.3 million mortgages in the UK, with loans worth over £1.2 trillion.
2. CML buy-to-let data for the first quarter of 2013 will be published on 9 May 2013.
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