The latest buy-to-let lending figures from the Council of Mortgage Lenders (CML) make positive reading for all stakeholders involved in the sector. Not only has lending increased 5% from the previous quarter, but the volume of buy-to-let loans is up 14% year-on-year, with the amount advanced outshining 2011’s figures by 18%.
It’s not just new business keeping things ticking over either, with a healthy amount of remortgaging supplementing house purchases as both types of transaction rose by 3% from the first quarter of the year. As well as posting strong volumes, the performance of buy-to-let loans has also proved pleasing, with arrears decreasing by a further 0.13% and the number of repossessions remaining minimal.
Our data certainly tallies with this last point as the percentage of our customers in arrears currently stands at a four-year low and is comfortably below the CML average of 1.9% at just 1.46%. This figure continues to reduce month by month and is the result of a concerted strategy to work with our landlord borrowers and steer them to a satisfactory solution for all parties. Whereas many lenders outsource this facility to a third party, we prefer to keep it in-house to maintain greater control over the whole process and our borrowers certainly appreciate the human touch that our trained team bring to proceedings.
The CML data also reveals that the stock of buy-to-let mortgages continues to grow. The number of outstanding loans totalled 1,416,000 at the end of the second quarter, with a value of £160.7bn which is an increase of £1.3bn from the previous quarter and £7.7bn annual fillip. Lending competition in the sector remains healthy, but average maximum loan-to-value amounts and minimum rental cover figures haven’t budged much from the 75% and 125% level respectively for a good few years now.
It is reassuring that while lenders compete on rates and product innovation, they are remaining sensible with their underlying criteria. A number of lenders who previously operated in the private rented sector have returned to buy-to-let after an absence of a few years and new providers are also attempting to secure their piece of the pie. This can only be a good thing for the market and consumers ultimately stand to benefit from increased levels of competition.
There seems to be nothing to prevent the buy-to-let market from continuing its impressive recovery into the next quarter. If the Funding for Lending scheme has the desired effect then we may see some renters able to become first-time buyers, but the government measures haven’t made saving for a deposit any easier, so it’s a case of wait and see. Given that subsidised state funding is also being utilised by some lenders for their buy-to-let propositions, there is no reason to suggest the private rented sector will miss out to first-time buyers in this sense.
I have often said that the buy-to-let sector can only benefit from a healthy mortgage market overall and I stand by that now. Here’s hoping the wider industry can share some of the magic soon.
Bob Young is Managing Director of CHL Mortgages