Buy-to-let lending increases
New buy-to-let lending increased for the second consecutive quarter in the last three months of 2009, according to figures from the Council of Mortgage Lenders.
There were 25,800 new loans advanced in quarter four, up from 23,700 in the third quarter but down from 38,000 in the fourth quarter of 2008. The 2009 growth is from a very low base after a consistent decline through seven consecutive quarters. Gross advances totalled £2.4 billion in the fourth quarter of last year, up £300 million from the third quarter but down £1.6 billion from the fourth quarter of 2008. Volumes remain comparatively low, both in absolute terms and as a percentage of overall lending.
For 2009 as a whole, there were 93,500 buy-to-let loans advanced. This is 58% down on the number advanced in 2008 (222,700) and is the lowest annual volume since 2001. Buy-to-let gross lending was £8.5 billion, down from £27.2 billion in 2008. Buy-to-let lending represented only 5.9% of all lending in 2009 (10.7% in 2008), but the total value of outstanding buy-to-let loans still represented around 11.8% of the mortgage market despite the recent shrinkage in new business.
All types of buy-to-let lending increased in the last three months of 2009. As with the mainstream mortgage market though, loans for house purchase continued to be advanced at about twice the rate of loans for remortgage with 62% of new buy-to-let loans being for house purchase. For 2009 as a whole, 60% of buy-to-let lending was for house purchase, compared to just 46% in 2008, demonstrating an ongoing demand to increase residential investment portfolios if finance is available. This is relevant in the context of the Treasury's new consultation seeking to encourage future individual and institutional investment in the UK private rented sector.
The very low interest rate environment continues to benefit buy-to-let borrowers as the majority of mortgages are on an interest-only basis. This has a particular benefit for those in arrears, allowing many to recover their situation if they suffer short term voids or non payment of rent by tenants. The number of landlords with arrears of more than 1.5% of the balance stayed the same in the fourth quarter at 20,700, but is 37% down from the 32,900 seen in the same period the year before.
The number of buy-to-let properties taken into possession in the fourth quarter fell by 25% from quarter three but rose 9% from quarter four 2008. 1,200 properties - 0.10% of the total buy-to-let book - were taken into possession compared to 1,600 in quarter three and 1,100 in quarter four 2008. Overall in 2009, there were 5,700 possessions (0.46% of the total book). This is similar to the 0.42% annual possession rate for the wider mortgage market.
Cases where a Receiver of Rent was newly appointed also dropped in the fourth quarter. These are similar in many ways to a lender taking possession of a mortgaged property as the landlord is removed, but the receiver collects rent from tenants so there is ongoing occupation of the property, and no need for court action, and passes it to the lender to apply to the mortgage payments. They accounted for a further 0.12% of buy-to-let mortgages, down from 0.14% in quarter three. Overall there were 8,600 new appointments of receivers in 2009, accounting for 0.70 of all buy-to-let mortgages.
Commenting on this latest buy-to-let data, the CML's director general Michael Coogan said: "The figures show that the buy-to-let market continued to improve, albeit slowly, throughout 2009, and we are encouraged by this recovery. The new business market remains well below previous levels though, and below the level of activity which is needed to enhance a vibrant private rental sector in the UK. We are concerned that future, wrongly directed, regulation may actually prevent buy-to-let playing its vital role in providing good quality homes and wider housing choices for people who cannot afford home ownership or do not qualify for social housing.
"Trends in arrears and possession, and the suggestion that there is potential for consumer detriment to arise from buy-to-let mortgages, are relevant to the current consultation by the Treasury on whether the FSA should be given power to regulate these transactions, and we will be responding on this shortly."