Buy-to-let sector remains buoyant

Borrowers took out 171,800 new buy-to-let mortgages, worth £21.2 billion, in the first half of 2007, according to CML data released today. By the end of June, the number of buy-to-let loans outstanding had reached a record 938,500. The value of outstanding loans totalled £108 billion - also a record and an increase of 14% on the second half of 2006. Buy-to-let lending now accounts for 10% of mortgage balances, compared to just 3% five years ago.

The number of loans taken out in the first half of this year was 3% lower than in the second half of 2006. But over the same period there was a modest 2% growth in the value of new buy-to-let lending, driven mainly by higher property values.

Although the rate of growth of the buy-to-let sector slowed in the first half of this year, it was stronger than in the wider mortgage market, in which the value of lending declined by 4%. As a result, buy-to-let lending accounted for 12% of all advances in the first half of this year, the highest proportion seen to date.

A strong rental market, in which landlords are reporting rising rents and shorter void periods, helped ensure that buy-to-let arrears remained lower than in the wider mortgage market. The number of buy-to-let mortgages in arrears of more than three months rose modestly to 0.63% from 0.58% in the second half of 2006. But the figure remains significantly lower than in the wider mortgage market (1.06%). Possessions of buy-to-let properties also nudged upwards to 0.08%, from 0.06% in the second half of 2006. Again, however, possessions were lower than in the mainstream mortgage market (0.12%).

The typical maximum aggregate loan that lenders were prepared to make to a single investor increased to £2.5 million, reflecting rising property prices and the continuing confidence of lenders in the sector.