Buy-to-let lending continues to rise

13 November 2012

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.

Boosting demand

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

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