Buy-to-let loans at their peak, says CML

Buy-to-let loans at their peak, says CML

	Published : Sun, 19 Feb 2006 08:20 By : David Simms Print this Story

LONDON: Mortgage lenders have advanced a record number of 130,400 loans to buy-to-let investors in the second half of 2005, which constitute an increase of 39 per cent over the preceding six months, according to the Council of Mortgage Lenders.

The value of these loans stood at 14.6 billion pounds, which is 47 per cent higher than in the first half of the year, and which is also a record.

The Council's director general Michael Coogan said there was a notable pick-up in the buy-to-let sector in the second half of the year, which helped the lending in 2005 to modestly exceed the year before. The strong demand in this sector partly indicated an increased demand for rental property, he added.

Coogan said in the wider mortgage market, there has been an 18 per cent fall in the number of loans for house purchase in 2005.

According to the Council, a softening of lending criteria has also contributed to the average maximum loan-to-value ratio for buy-to-let lending rising to 85 per cent. Lenders now expect monthly rental income to exceed mortgage payments by at least 25 per cent.

Meanwhile, a survey by Mortgage Trust, a buy-to-let lender, showed that the confidence in the housing market and stable interest rates have led to an expansion of buy-to-let portfolios of several landlords. Nearly 30 per cent of respondents are currently buying more property – more than double the number doing so 18 months ago. Landlords also expect to increase their portfolios by 14 per cent, equivalent to one property per landlord.

The survey also indicated that the government's reversal in the policy regarding self invested personal pensions (SIPPs) had little effect on landlords' intentions to invest. Nearly nine in ten landlords said the withdrawal of the option to invest residential property in a SIPP would have no effect on their property investment intentions.

The National Association of Estate Agents has come out with data showing first-time buyers' share of the housing market has fallen to its lowest level for five years in 2005. In 2000, the number of first-time buyers accounted for 29 per cent of sales each month on average. This dropped to under a quarter in 2002, and then to just over a tenth, at 12.2 per cent, in 2005. In December 2005, first-time buyers accounted for just 7.4 per cent of the market.