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Buy-to-let lending £16.4 billion in 2012

14 Feb 13

Buy-to-let lending £16.4 billion in 2012

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."

 

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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