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Buy-to-let market continues modest improvement

Published: 10 February 2011

The buy-to-let market grew by 7% in 2010, according to the latest data from the Council of Mortgage Lenders. At the end of the year there were an estimated 1.3 million buy-to-let mortgages outstanding, worth £152 billion, accounting for 12% of the total value (11.5% by number) of mortgages outstanding.

The total value of buy-to-let lending in 2010 was £10.4 billion (22% higher than in 2009), and the total number of loans advanced in the year was 102,000 (10% higher than the previous year).

In the fourth quarter of 2010 there were 28,600 new buy-to-let loans advanced, worth £3 billion. This was a rise of 6% by volume and 7% by value from the third quarter.

In terms of loan performance, the buy-to-let sector has seen a further improvement in the number of mortgages in arrears. While direct comparisons with the owner-occupied sector are difficult because of the additional option of appointing a "receiver of rent" on a buy-to-let loan, the general picture is that the share of arrears cases accounted for by buy-to-let loans is now only just over the overall buy-to-let share of the mortgage stock, having previously been notably higher than the owner-occupied sector. Low interest rates are a key driver of this narrowing of the gap, since the largely interest-only buy-to-let sector gains greater benefit from lower interest payments than the predominantly capital-and-interest owner-occupied sector.

Looking ahead to the prospects for the buy-to-let sector in 2011, the CML expects strong rental demand to remain, driven not least by the continuing deposit constraints to entry to the owner-occupier market.

Commenting on the latest results and the outlook for the buy-to-let market, CML director general Michael Coogan commented:

"Funding remains a key constraint on growth in buy-to-let lending, but demand seems to be resilient and loan performance has improved. Looking ahead, loan performance could potentially be adversely affected by rising rent arrears or interest rate rises, but at present there is no indication of these pressures materialising in practice. There is also a strong counterbalancing growth influence on the buy-to-let market, as tenant demand seems set to remain high in the face of continuing deposit constraints to entering the owner-occupier market."


Notes to editors

1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 94% of all residential mortgage lending in the UK. There are 11.4 million mortgages in the UK, with loans worth over £1.2 trillion.

2. The CML buy-to-let press release for the first quarter of 2011 will be published on 12 May 2011.


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