Buy to let mortgages continued to recover in the third quarter, providing the only signs of dynamism in an otherwise stagnant mortgage market during the third quarter, according to figures released last Thursday by the Council of Mortgage Lenders (CML).
Lenders approved 26,900 buy to let loans in the three months to the end of September, with a total value of £2.8 billion. The loan volume posted an 8% rise from the previous quarter, while loan values registered a 12% rise in loan value from the £1.9 billion in the second quarter and reached its highest point since nearly two years ago. Compared to the same period last year, the lending volume was higher by 14% and loan values by 33%.
The other sectors of the mortgage market did not follow the significant advances made in the buy to let mortgage market. There were 50,000 mortgages approved for house purchases at the end of September, a level unchanged from August, but the amounts approved declined £200 million. First-time buyers’ loans in September rose 4% over August levels but still fell 6% year-on-year. Loans in arrears held steady at 1.45%, as did the proportion of repossessions (0.12%) and receiverships on rent (0.10%).
The CML statement expressed optimism for continued growth of demand for buy to let loans, due to the unfilled demand for rental property.
The CML director general Michael Coogan observed: ‘We would expect buy-to-let demand to pick up further if current rising rental trends continue and house prices remain broadly stable.’
The picture gets blurred a bit because of government’s decision to cut housing benefit. It is not yet clear how landlords will respond to the revised limits. The initial reaction among nine out of ten landlords, according to the National Landlords Association, is to refuse any prospective tenants on housing benefit. About half of landlords adopt a hard line, saying the cuts are totally unacceptable.
Coogan adds: ‘The bigger question is whether there will be sufficient supply side capacity to meet that demand [for growing rental property], as the number of buy-to-let lenders dwindled in the credit crunch after 2007 and is yet to be fully restored.
‘However, it is clear that in a market where access to home-ownership has become more difficult, the private rental sector is experiencing, and will continue to benefit from, high levels of demand for good quality housing.’
The best indication that can be drawn from these CML figures is that both landlords and lenders are getting more confident about the buy to let market, going forward. While current lending levels are barely one-fifth of the peak lending prior to the credit crunch, it now seems that the market has found its footing and is set to grow again.