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Buy-to-let in the first quarter of 2012

10 May 12

Buy-to-let in the first quarter of 2012

New buy-to-let lending in the first quarter of this year totalled £3.7 billion (32,300 loans), according to the Council of Mortgage Lenders. This was 5% down on the fourth quarter of 2011. While 32% higher than in the first quarter of 2011, buy-to-let lending is still only around a third of its 2007 levels.

Buy-to-let lending for house purchase in the first quarter fell by a greater amount (9%) than remortgaging (1%), but both were around 30% higher than in the first quarter of 2011. The buy-to-let sector continues to increase its share of the mortgage market, with buy-to-let mortgages representing an estimated 12.8% of the total value of outstanding mortgages at the end of the first quarter, up from 12.6% at the end of 2011 and 12.2% at the end of the first quarter of 2011. The total number of buy-to-let mortgages stands at just over 1.4 million, with a total value of £159.4 billion.

The average maximum loan-to-value available from lenders on buy-to-let mortgages remained at 75% in the first quarter of the year, with the average minimum rental cover 125% - up from 123% in the previous quarter, but otherwise the same as for nearly three years.

In terms of loan performance, the number of buy-to-let mortgages in arrears fell a little in the first quarter of 2012, and the arrears rate on buy-to-let mortgages continues to be lower than in the owner-occupied sector. At the end of the first quarter, around 1.7% of buy-to-let mortgages were in arrears of more than three months (including cases where a receiver of rent has been appointed), compared with around 2% of owner-occupier mortgages.

The repossession rate was 0.12% - virtually the same as for the last five quarters - compared with 0.08% in the owner-occupied sector. It is not surprising that the buy-to-let repossession rate is higher than in the owner-occupier sector, where the focus is on forbearance and trying to keep home-owners in their homes. In the rented sector, expired tenancies allow repossession to be undertaken without unexpected disruption to tenant households. In absolute terms, the number of buy-to-let repossessions remains only a small proportion of total repossessions.

Number of repossessions in the owner-occupied and buy-to-let sectors

Source: CML research

Commenting on the latest buy-to-let results, CML director general Paul Smee says:

"Even though buy-to-let lending is running at only around a third of its peak levels, the sector is continuing its gradual expansion. It has become an important part of the overall landscape of housing provision in the UK."

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. The CML buy-to-let press release for the second quarter of 2012 will be published on 9 August 2012.

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