Buy-to-let sector imitates housing sector and applies the brakes |
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Wed, 17 Aug 2005 22:05
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Detrimental effects of the slowdown in the property market are now becoming quite evident, one of them being the decelerating buy-to-let sector.
The Council of Mortgage Lenders (CML) revealed data wherein lending to investors seemed to have kept pace with the stagnation in house prices growth, therefore falling in the first half year. In the half year, about £9.9bn was lent out via buy-to-let loans, which was a tad higher than the amount given over 2004’s second half. Even though the mortgage amount had slipped 4% in the period to touch 94,000, it was far better than the disgraceful 18% crash that happened during the second half of 2004.
CML’s senior policy adviser, Andrew Heywood, believed that the buy-to-let sector was just following on the footsteps of the housing sector, which was continuing its “slow landing”. He added, “Our half-yearly figures suggest the market is in robust shape, and the recent cut in interest rates by the Bank of England will serve to buoy up the sector in the coming months. However, lenders will not be complacent, and will keep a close eye on lending to ensure it is responsible and sustainable.”
Nevertheless, latest inflation rates tell a different story. Rising prices of oil and energy saw inflation in July scaling up to 2.3 % from 2 % in June, only implying a lesser probability of a further interest rate cut in the coming month.
The entire buy-to-let sector could be valued at £63.5bn; wherein about 632,000 loans, i.e. 7% of the residential loan market, were outstanding loans. It was also divulged that the percentage of people who had to make debt repayments had increased to 0.7% in 2005’s first half as compared to last year’s figure of 0.66% over the second half.
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