Latest news from the property market

Buy to let mortgages surge

A combination of high rents and ever-growing demand has led to the the popularity of buy-to-let (BTL) mortgages soaring. Between July and September, 33,600 new mortgages were taken out for property purchases, making it the busiest quarter since the end of 2007, according to data from the Council of Mortgage Lenders (CML). The value of buy-to-let mortgages for house purchase was 36.4 per cent higher in September than in the same month last year, and 61.5 per cent higher for buy-to-let remortgaging. Gross lending on buy-to-let in the third quarter rose by 24 per cent compared to the previous three months, and was 49 per cent up on the third quarter last year.

With interest rates still low and likely to remain that way – see our earlier blog post on Mortgage rates – leading to poor returns from savings accounts, have made property an increasingly appealing investment for savers.

Welcoming the trend in buy to let mortgages

The Bank of England are cautious about the trend. In a speech on Tuesday night, Sir Jon Cunliffe, deputy Bank governor, said the risk was that “they could amplify an adverse shock to the housing market”.

“It is not in my view at all impossible that sharp movements in prices and a loss of confidence in future capital appreciation, in combination with interest rate increases, could cause a substantial number of buy-to-let landlords to seek to exit the market. This could put material downward pressure on house prices,” he said.

However, industry experts suggested a more benign explanation for the rise in buy-to-let lending — that it had far further to go to recover its pre-crisis levels than the owner-occupier market.

Brian Murphy, head of lending at broker Mortgage Advice Bureau, said the growth of the sector was significant over the year. “However, this form of lending is rising from a much lower base than the residential market, as availability of buy-to-let mortgages was worst hit by the recent recession.”

The Council of Mortgage Lenders said that despite the strong growth, buy-to-let remained a minority of its members’ business.

Paul Smee, director general of the CML, said: “Buy-to-let continues its growth this period but, at 18% of new lending in September, remains the fourth largest lending type behind first-time buyers, home movers and remortgages.

“There were five times as many house purchase loans to homeowners as buy-to-let landlords in September, and the growth in buy-to-let lending largely continues to reflect its more belated recovery from recession.”

During the downturn, buy-to-let lending declined more than lending to homeowners, as investing in property looked more risky to individuals and lenders. While loans to homeowners for house purchase declined by 50% in volume terms from 2007 to 2009, buy-to-let loans for house purchase declined 71% in the same period, the CML said.

Further reading

The booming buy-to-let mortgage market

Buy-to-let mortgages at highest level since 2007, says CML

UK buy-to-let lending surges

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