CML reports stable first quarter in the buy-to-let market

New buy-to-let mortgage lending in the first three months of 2011 totalled £2.9 billion across 27,600 loans, according to latest data from the Council of Mortgage Lenders.

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

Overall, the total outstanding number of buy-to-let loans rose from 1,305,000 at the end of 2010 to 1,313,200 at the end of the March 2011, with a rise in the outstanding value of buy-to-let lending from £151.5 billion to £152 billion. Buy-to-let lending accounts for 12.3% of total outstanding mortgage lending by value, and 11.6% of mortgages by number.

Lending criteria and characteristics changed very little in the quarter. The average maximum loan-to-value ratio remained at 75%, with the average minimum rental cover requirement at 125%.

In terms of loan performance, the arrears rate on buy-to-let lending is increasingly similar to the owner-occupied sector. As at the end of March, the 3-month arrears rate stood at 1.62% on buy-to-let loans where no receiver of rent was in place, and 2.24% on buy-to-let loans if receiver of rent cases were included. This compares with a 3-month arrears rate of 2.15% in the owner-occupier sector.

The repossession rate on buy-to-let mortgages remained higher than in the mainstream market (0.13% of buy-to-let loans were subject to repossession in the first quarter, compared with 0.07% of owner-occupied loans), as has been the case for a substantial period, primarily reflecting the additional forbearance efforts in the owner-occupier sector to keep borrowers in their homes (as opposed to landlords whose properties may be empty, for example).

Commenting on the buy-to-let market, CML director general Michael Coogan said: "Buy-to-let continues to progress positively in the context of a stable, but still low-volume, overall market. Demand for rental property remains strong, and as more funding becomes available we would expect to see buy-to-let lending increasing. The performance of buy-to-let loans is also holding up well, and the differential between arrears rates in the buy-to-let sector and the owner-occupier sector has narrowed substantially so that there is now only a modest difference between them."