Robust growth in buy-to-let loans will hurt first-time buyers

Robust growth in buy-to-let loans will hurt first-time buyers

	Published : Thu, 17 Aug 2006 10:05 By : Andrew Stead Print this Story

LONDON - Buy-to-let mortgage lending jumped to a record high in the first six months of this year with the number of loans taken increasing by 17 percent to 152,500. The overall value of the loans is estimated to be worth £17.5 billion, according to a survey.

The survey, conducted by the Council of Mortgage Lenders (CML), reports that the number of residential buy-to-let mortgages is at 767,000, with the total value being £83.9 billion. The data provided by this survey is identical to that of others, which confirm that the housing market is booming and sales are soaring.

However analysts expect that the surprise quarter point increase in the interest rate announced by Bank of England this month will put a break on the gains in the property market. There will still be a modest growth although it will not be as robust as predicted earlier.

"The buy-to-let market remains robust, underpinned by strong rental demand. But investors have shown that they are quick to adjust to changing market conditions, so the view that interest rates are now more firmly on an upward trend is likely to cause the rapid growth of buy-to-let investment to slow in the coming months", Michael Coogan, CML director general, said. Buy-to-let lending had slowed down considerable in the later half of 2005, but migration from EU accession countries has seen the demand increase to the present level.

Though the boom in housing market is good for seller, first time buyers will be the ones who suffer the most, according to Milan Khatri, chief economist at the Royal Institution for Chartered Surveyors, said. "The news is not so good for first-time buyers, with house prices continuing to rise and the alternative of renting steadily becoming more expensive, with RICS letting agents stating that in the second quarter rents are rising at their fastest pace since July 2001", he added.