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Buy-to-let lending remains stable


Published: 17 May 2011 | Author: Bernard Clarke

Buy-to-let lending continued to progress positively within the context of a stable but low-volume market, our latest data showed.

Echoing a more pronounced decline of 11% in the wider mortgage market, buy-to-let lending in the first quarter of this year was around 3.5% lower than the £3 billion (28,600 loans) in the fourth quarter of 2010. But buy-to-let lending was up on the £2.1 billion and 22,000 loans in the first quarter a year ago.

The latest figures show that there are now 1,313,200 outstanding buy-to-let loans, compared to 1,305,000 at the end of last year. Over the same period, the value of outstanding buy-to-let lending nudged up from £151.5 billion to £152 billion. Buy-to-let lending now accounts for 12.3% of the total value of outstanding lending and for 11.6% of loans by number.

Lending criteria and characteristics remain unchanged, with the average maximum loan-to-value ratio at 75% and an average minimum rental cover requirement of 125%.

The arrears rate on buy-to-let lending edged up in line with the mainstream mortgage market.  At the end of March, 1.62% of buy-to-let loans with no receiver of rent in place were in arrears of three months. The proportion rose to 2.24% if receiver of rent cases were included. This compares with 2.15% in arrears of three months in the owner-occupied sector.

The proportion of buy-to-let properties taken into possession remained higher than in the mainstream market, as has been the case for a while, primarily reflecting the additional efforts in the owner-occupied sector to keep borrowers in their homes (as opposed to landlords whose properties may be empty, for example).

Overall, demand for rental property remains strong and we would expect to see an increase in buy-to-let lending in the period ahead, as more funding becomes available.