Buy-to-let lending continues to rise
Investors continue to pile into the buy-to-let market with figures from the Council of Mortgage Lenders (CML) revealing that £4.2 billion was lent in buy-to-let mortgages during July to September, an 8% increase from the previous three months.
During the third quarter of 2012, a total of 34,400 buy-to-let mortgages were taken out. Total lending in the sector for the year to date has now reached £11.8 billion, 19% higher than the same period last year.
Jonathan Samuels, chief executive of Dragonfly Property Finance, says the market is being fuelled by rental demand caused by the difficulty of getting on the housing ladder.
"The mainstream lenders' continued reluctance to ease their lending criteria or reduce interest rates on high loan-to-value loans is stoking rental demand and boosting buy-to-let demand," he says.
Though lending has increased this year, the CML points out that it has come from a low base and the market is still subdued compared with the activity seen prior to the credit crunch. It says lending this year is still only likely to total around a third of the amount seen during the market's peak in 2007.
Director of Atkinson McLeod estate agents, Dan McLeod, doesn't think there will be a return to the type of activity seen five years ago however.
"These days, it's a more sensible type of investor that's moving into buy-to-let. The casino approach, where people were simply betting on short-term capital appreciation is a thing of the past," he says. Landlords are now taking a much more long-term approach, looking at a 10-year view and focusing on rent and yield, "which is what they should always have done," he adds.
At the end of the third quarter of this year the buy-to-let mortgage market was worth £164.3 billion, with 1.44 million outstanding loans.
This article was written for our sister website Money Observer
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.
The catch-all term applied to investors who buy properties with the sole intention of letting them to tenants rather than living in them themselves, with the proceeds from the let usually used for the repayment of the mortgage. Buy-to-let investors have to take out specialised mortgages that carry higher interest rates and require a much bigger deposit than a standard mortgage. Other expenditure can include legal fees, income tax (on the rental profits you make), capital gains tax (if you sell the property) and “void” periods when the property is unlet.